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Car being added to Chapter 13 but only two weeks late

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    Car being added to Chapter 13 but only two weeks late

    My attorney is insisting on including my car payment into my chapter 13 but I’m only a few weeks late. Do you thinks it’s wise for it to be added on?

    #2
    You may misunderstand how Chapter 13s work. Everything that you are keeping is "included" in the Chapter 13 Plan. You may be confusing "payments outside the plan" with "payments inside the plan." The difference is that the former is done directly to the creditor, and the latter is done through the Trustee.

    Whether or not you can pay outside the plan when you're in arrears at the time of filing, is fact specific. Most bankruptcy districts require that the debtor MUST absolutely pay any claim (creditor) through the plan if the debtor is not current at the time of filing. It's that simple. Unless you come current right now (today) and before filing, you don't have much of an option on paying "outside" the plan.

    Please know that paying "inside" the plan has many advantages. The automatic stay is in affect and the creditor is paid by the Trustee. The creditor can't take any actions even if the Trustee forgets to make a payment and/or pays late. If you miss a payment when you pay "outside" the plan, you don't receive the benefit of the automatic stay and the creditor keeps all of their non-bankruptcy remedies (think: repossession).

    Another benefit of paying inside the plan is if you purchased the vehicle more than 910 days OR you refinanced it (didn't use purchase money for the loan). If so, you get to actually "refinance" the vehicle using the Chapter 13 with a different and possibly lower interest rate known as the Till Rate (it's about 5.25% right now). You also get to reamortize the payments over the life of the Chapter 13. So, if you're in a 60 month plan, that's like refinancing the vehicle with a new 60 month loan at 5.25%.
    Chapter 7 (No Asset/Non-Consumer) Filed (Pro Se) 7/08 (converted from Chapter 13 - 2/10)
    Status: (Auto) Discharged and Closed! 5/10
    Visit My BKForum Blog: justbroke's Blog


    I am not an attorney. Any advice provided is not legal advice.

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      #3
      Thank you

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        #4
        I did the same thing. My credit was bad (shocker) when I filed and I had a 72 month car loan at 21% that was brought down to 4% in the plan. In the end I paid on it for another 6 months beyond the original loan length.

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          #5
          I just want to personally say that refinancing through the Chapter 13 had major advantages for me and my budget. I kept 2 vehicles and it allowed me additional approved expenses. That additional expense is what gave me the ability to save some emergency funds, if only that they were immediately depleted by life's little surprises (new tires, broken sewer line, HOA demands to replace sod, other HOA demands for upkeep, business travel, etc).

          Mine was strategic. I had actually thought about surrendering one of the vehicles!
          Chapter 7 (No Asset/Non-Consumer) Filed (Pro Se) 7/08 (converted from Chapter 13 - 2/10)
          Status: (Auto) Discharged and Closed! 5/10
          Visit My BKForum Blog: justbroke's Blog


          I am not an attorney. Any advice provided is not legal advice.

          Comment


            #6
            Originally posted by justbroke View Post
            Whether or not you can pay outside the plan when you're in arrears at the time of filing, is fact specific. Most bankruptcy districts require that the debtor MUST absolutely pay any claim (creditor) through the plan if the debtor is not current at the time of filing. It's that simple. Unless you come current right now (today) and before filing, you don't have much of an option on paying "outside" the plan.
            In addition to JB's comments, many districts require that vehicle financing (as opposed to a true lease) be paid through the Plan regardless of payment status. Why? The answer is simple. The Trustee makes money if he pays the creditor. The Trustee does not make money if you pay the creditor.

            Des.

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              #7
              Originally posted by despritfreya View Post

              In addition to JB's comments, many districts require that vehicle financing (as opposed to a true lease) be paid through the Plan regardless of payment status. Why? The answer is simple. The Trustee makes money if he pays the creditor. The Trustee does not make money if you pay the creditor.

              Des.
              Reminds me of what my attorney said: "We'll let the trustee pay the car payment so she has something to earn a fee on." I didn't get the sense it was actually required in my district, just that it was a good way to make the trustee happy.
              LadyInTheRed is in the black!
              Filed Chap 13 April 2010. Discharged May 2015.
              $143,000 in debt discharged for $36,500, including attorneys fees. Money well spent!

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