Auto Loans, and how does it work in 13

[Mark80]

I know your autos get shoved into your chapter 13 payback plan. My Attorney told me they pretty much did this just to get more money out of you for the trustee. But in any event how do the loans get paid back during the plan? Do your lein holders get the same payments as you did before or do they change, and if so how do they get the lein holders to go along with a bankruptcy filing?

I have two loans now, and will be filing in the coming months, just curious how it worked.

Thank you

[ccgirl]

My auto loan is paid outside of the plan. I continue to make the payments.

[becky20]

How old are your vehicle loans? What about interest rates? I know if the auto loan is more than 910 days old they can "cram" your loan, which means that they only make yo upay what it's worth, not necessarily what you owe. Also, I THINK they can lower your interest rate if you have a pretty high rate, I THINK... It sounds like some people pay their loans outside the plan, some pay inside the plan...

[lrprn]

Our auto loans are paid inside our plan by our trustee because in our unique situation, it lowered our Ch 13 monthly payments to stretch the car loans out the full five years and let our trustee pay them, even though we do have to pay a bit extra to cover the trustee's fee each month to do so.

In our case, the trustee pays our car lender two payments each month for each car - one for the principle and one for the interest. The amounts are never quite the same each month and do not add up to anything close to our original car payments.

You need to ask your lawyer (or during your 3-4 lawyer interviews) to find out whether paying your car payments yourself or having your trustee do it is best for you in your situation.

[Mark80]

Ok so usually they shove them in *cram* or what not to your best interest given the situation. And your auto lenders are ok with this? I owe 4 years on my VW and he did mention that the payment would be less over the 5 year plan on it. But I was curious as to why auto lenders would allow this?

[justbroke]

Ok so usually they shove them in *cram* or what not to your best interest given the situation. And your auto lenders are ok with this? I owe 4 years on my VW and he did mention that the payment would be less over the 5 year plan on it. But I was curious as to why auto lenders would allow this?

There's no "allow" part of it, in a Chapter 13 Bankruptcy. What a Chapter 13 basically does for you, is to "fix" any amount you owe to your secured creditors, while keeping your unsecured creditors (and everyone) from attempting to collect money from you. That lasts for a period of 36 to 60 months (depending on your income).

Once in the Plan, the Bankruptcy allows you to spread out payments over a 36 month to 60 month period. The creditors have nothing to say about that. The law is on the debtor's side, as it should be.

The part about "cramming down" an auto loan, is also something in the Bankruptcy code that allows this. However, the car must have been purchased more than 910 days (2.5 years) prior to filing. Otherwise you can't "cram down" the loan. However, you can spread out the payments over the life of your Chapter 13.

(As a side note, I found that, in my 60 month plan, paying the cars off in 3 years gave 1.5% more to the unsecured creditors (keep them happy) and I get the titles in 3 years, instead of 5.)

[Mark80]

Thanks for that explination Justbroke!

So I have one car loan at 4 years to go, they will stretch that out over 5 years. But my new car can't be crammed down or stretched out, so how will that work if I have a 72 month loan on it?

[justbroke]

Thanks for that explination Justbroke!

So I have one car loan at 4 years to go, they will stretch that out over 5 years. But my new car can't be crammed down or stretched out, so how will that work if I have a 72 month loan on it?

I don't recall if you stated you were in a 36 month or 60 month plan. Anyhow, we'll assume 60 months (5 years).

For the car with 48 months of payments left (4 years), the payments will actually be LOWER, because you'll be spreading th remaining 4 years over 5 years!!! Nice! It's like getting a "refinance" for free! (Well, that's if your lawyer think it's best for your budget to spread it over 5 years.)

For the 72-month car loan, first, are you current? I don't recall how many months you had left on it?

[Mark80]

Well its a brand new loan, my attorney recommended picking something up to replace my dieing old car before I entered Chapter 13. (5 year plan pretty sure) So I am current, just started the billing cycle with it. If its current (which it will be) on entering the plan, but with over 5 years left what happens to it?

Thank you for the answers!

[lrprn]

If its current (which it will be) on entering the plan, but with over 5 years left what happens to it?

Your lawyer is likely to recommend that you pay the new car loan yourself rather than having the trustee pay it. If the trustee pays it, the entire loan value must be paid off by the end of your Ch 13. If you make the payments yourself, then the payments stay where your lender set them and you have the full loan term to pay off the car. However, even though you are making the payments, you still can't sell the car without your trustee's permission before your Ch 13 is over because it's a part of your bankruptcy estate.

[Mark80]

Ok I wasn't sure if that was a decision made by your Attorney or a automatic situation enforced by chapter 13. So If I pay it outside the plan, it still obviously counts against my disposable income as a secured loan, so I should have the same either way left over for the unsecured payback during the plan.

This was one of the reasons I was told to get a replacement auto besides needing something reliable during the duration. I was told that if I end up with say 600 disposable after deductions that it would all go out to the unsecured loans. So if I ate up some of that with another car loan I would still be out the 600 but half would go towards the new car loan and the other to the unsecured. In the end getting me into the payback plan, plus a newer car at the same price tag.

I am just kind of double checking on everything to see what everyone else think!

Thanks for the help!

[ThreadsSnapping]

What about putting the car into the plan and having it paid off in 5 years? Either way his payment is going to be the same adn he comes out with a paid off car in the end. Don't know if it's possible but it sounds like the best course of action for him.

TS

[baguy]

If the car loan is OUTSIDE the plan, then what happens after it is paid off in full? For example, if you were going into a 5 year plan, and you only have 2 years left on your auto loan ($400 a month), what happens after the 2 years? Does your plan payment then get re-calculated and goes up $400, so your creditor's get 400 more every month for the last 3 years of the plan? Or do you just have 400 more a month to spend how you like?

[lrprn]

If the car loan is OUTSIDE the plan, then what happens after it is paid off in full?

This is a good question to ask your lawyer.

Our lawyer spread our car payments out to the very end of our 5 year plan. He said it was to lower our monthly payment - and it did - but now that I think about it, it also may have been to not obviously free up additional disposable income the trustee could use to increase our monthly payment as the cars paid off early. Our lawyer is very savvy about Ch 13s and knows our trustee's preferences inside and out. As I said - this one really needs local legal counsel to answer reliably.

[Mark80]

I don't think that will happen in my case as I was told my 4 year loan will be dragged out over the 5. And my newer loan is a 6 year, and that can't be crammed. I know you guys are trying to figure out that scenario but i wasn't sure if it was in regards to my situation.