Car question

[Reddrocket07]

I received a letter today from my car loan lender. It stated that we still owed another 7k on our vehicle even though our bankruptcy shows it was paid off. When I called the company, they told me that the vehicle is paid off in the bankruptcy, but we still owed 7k because that was what was on the rest of the loan. However, once the bankruptcy is discharged, we wouldn't owe it. The top of the letter says it is not a bill, but it's asking us to pay. Anyone ever receive one of these during their 13? Is this legal?

[justbroke]

I'm assuming that your case is discharged? If so, you really need to talk to your attorney. The "balance" of the automobile loan should have been discharged.

I'm also assuming that you ended up "cramming down" the value of the car to the actual market value at the time your case was confirmed. The difference, known as the bifurcated "unsecured" value, is placed into the unsecured creditor pool. During the life of your Chapter 13, the unsecured pool gets any leftover "disposable monthly income" (DMI). If that pool of DMI pays only 2% of the unsecured (bifurcated) balance, then that amount is discharged at the time your case discharges. The lender may not collect and certainly cannot hold the title on your car hostage by demanding you pay the unsecured (discharged) balance!

If you received a discharge in your case, then this would be a violation of the permanent discharge injunction which prohibits them from attempting to collect the discharged unsecured balance.

On the other hand, if your case is not yet discharged, then this is perfectly legal and not a violation... even of the automatic discharge so long as they are not attempting to "collect". This would change once your case actually discharges.

So whether this is a bad thing or not, depends on whether your case is discharged.

[Reddrocket07]

We havent been discharged yet. We are a little past the halfway mark in our 13. We are on a 5 yr plan.

[justbroke]

Then most of what I wrote is moot. You are in a Chapter 13 and they are sending "informational" statements. You cannot receive title to the vehicle until the case is discharged. I'm still assuming that the car was valued at the time of your confirmation and that ended up being $7K less than what you owed at the time. The lender is allowed to keep maintaining the actual balance until such time as the case dismissed or you receive a discharge. At the time of discharge, any unpaid part of the "unsecured" balance would be actually discharged and the lender would be required to release the lien and surrender the title to you.

Until such time, informational statements are just that... informational. These are very common, especially with mortgage companies. It is technically a normal "bill" but they just add the words "Informational", include some language about if you're in bankruptcy, don't pay... and maybe even put words such as "THIS IS NOT A BILL" even though it is... a bill!

[SMinGA2]

Part of the difference could be that your ch. 13 paid the car loan at a lower rate than your contract. If you finish your plan, you're all set. If you dismiss or convert to a ch. 7 your original terms stand. (If you convert to a 7, then it only matters if you want to keep the car.)