CAR Question

[Dizzy]

I am trying to decide whether to include a car I used as collateral for a loan in my Chapter 13. Does anyone know if it gets totaled, what happens to the insurance $? Does it go to pay off the loan or do I get to use it to replace the car? I really REALLY love this car. The loan amt was 8K and that's about what it would cost to replace it. If I keep it in the plan, my payment will go from $225 per month to $390 a month, and I know I couldn't replace it for $165 a month. On the other hand, I don't think I'd want to risk paying for it for a while, having something happen to it, not being able to afford to replace it, being obligated to finish paying for it in the plan, and not having a car either. How does that work? Thanks!

[TrainWreak]

As I have heard it--All cards on the table. That way there are no surprises

[Dizzy]

Hi TrainWreak, I think you answered a question for another thread and accidentally ut it here.

[terryorr56]

My car was included im my plan . It was totaled in an accident, My ins payed the fair market value of the vehicle to the loan company the defentcy was turned into an unsecured debt

[Dizzy]

I see. Thank you! Our (projected) payment without the car would be 225 and with would be 390. The car, while I love it, just isn't worth that much to me. Right now it has an electrical problem and a transmission problem and it would cost me almost $1000 to get it back in order to even include it, plus repairs. I guess it's what you'd call a no-brainer. What I can't wrap my brain aound is that by the time the five year plan is over, we'll be paying back about 15K and all our debt, except 4K in back house payments, is unsecured. How can this BE?

[lrprn]

What I can't wrap my brain aound is that by the time the five year plan is over, we'll be paying back about 15K and all our debt, except 4K in back house payments, is unsecured. How can this BE?

Ch 13 is a wage earner's debt reorganization and management plan. All your creditors, including the unsecured creditors, have a right to file a claim to get whatever % payback your plan allows. In return, you get to keep assets that could very likely be lost or severely compromised if you were able to file Ch 7, stop your unsecured creditors from continuing to charge outrageous interest rates and late fees, and also make up secured loan arrears and pay back overdue taxes under the full protection of the bk court and your automatic stay.

Not a bad tradeoff considering the alternative of decades of being hounded by debt and tax collectors with an ever-increasing upward spiral of debt that you have almost zero chance of ever paying off.