If you’re like many people, a car is more than just transportation. It’s how you get to work, care for your family, and manage daily responsibilities. The threat of repossession adds pressure when money is already tight, but Chapter 13 bankruptcy may provide a way to keep your vehicle and pay back what you owe over time.
Stopping repossession with Chapter 13
When someone files for Chapter 13 bankruptcy, the court puts an automatic stay in place. This legal protection prevents creditors from taking action to collect debts, including repossessing a car. Even if you’ve missed several payments, your lender must stop all efforts to take the vehicle once the stay goes into effect. That gives you the chance to create a repayment plan without losing access to your transportation.
Instead of paying the full past-due balance immediately, you make one monthly payment that covers both current and past-due amounts. As long as you keep up with the plan, your lender cannot repossess the vehicle. This structure gives you the time and space to catch up in a way that works with your budget.
Reducing loan balances and interest
Some people may qualify for additional help through a “cramdown.” If your car loan is older than 910 days and the vehicle is worth less than what you owe, the court may reduce the loan balance to match the car’s current value. The remaining amount gets treated like unsecured debt, which might not need full repayment. Chapter 13 can also reduce your interest rate in some cases, which can lower your monthly payment even more.
Losing your car can make a bad financial situation worse. Chapter 13 can give you a way to protect that stability while working toward financial recovery. If you’re behind on payments, this option may help you regain control without giving up your car.
