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Your House and Your Car in Chapter 13

The Truth from a Hawaii Bankruptcy Attorney

If you have steady income but are drowning in debt, filing Chapter 13 bankruptcy can stop foreclosure, stop repossession and allow you to become current on both your home and your car payments. As one of the largest filers of Honolulu bankruptcy, our experience attorney knows exactly how to arrange a payment plan for your mortgage and car loan to get your financial life back on tract.

If you are being threatened with foreclosure or repossession, filing for personal bankruptcy will immediately stop the proceedings through what is called the “automatic stay.” This is a court order that occurs instantly when filing bankruptcy and stops the lender from foreclosing upon a home or repossessing a vehicle. You can then review your options to save the home and car with your bankruptcy attorney.

Your Home in Chapter 13

A Chapter 13 bankruptcy establishes a payment plan whereby you can catch up with your secured debt obligations (including a mortgage) over three to five years and discharge remaining unsecured debts. Once the plan is approved by the court, you will make one single monthly payment to the bankruptcy trustee. This repayment plan will include provisions to help pay off any accumulated mortgage rearrange (the back amount owed). Most people who file Chapter 13 make all the required payments and will become current on the mortgage to save the home.

Another benefit of Chapter 13 is for homeowners who have a second mortgage and owe more money on the primary mortgage than the property is worth. In this situation, the second mortgage or line of equity may be eligible for a complete discharge. Known as a “lien strip,” this can be extremely helpful for homeowners whose property value has dropped in recent years.

Your Car in Chapter 13

The depreciatory nature of an automobile means that people sometimes owe more for a vehicle than its actual value. If this is the case, when you file for bankruptcy, then you may qualify for what is called a “cramdown.” A cramdown reduces the amount owed to the car’s actual value, because this is the amount that the lender would receive if it repossessed and sold the vehicle. To qualify, you must have purchased the car more than 2 ½ years prior to bankruptcy, along with other requirements. A qualified lawyer can review the facts of your situation to see if a cramdown is available to you.

As with homes, a Chapter 13 plan can also allow you to pay the arrearage (or late payments), helping you to become (and stay) current on your car loan. The amount of car payments must be considered reasonable by the courts, however – if you are making an exceptionally large payment every month for a luxury car, you might have to downgrade to a more affordable vehicle. No matter what, there is a solution to your problem, just call our office to learn about the options to keep your car in Chapter 13.

Help Is Here; Just Make the Initial Call

There is no need to suffer the unknown when you are struggling with debt and considering bankruptcy. You have more options than you may realize to save your home and your car by filing a Chapter 13 bankruptcy. When you contact our office, we can help you figure out the best path to keep what you need for your family, as you take the first step towards starting your financial life anew.

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