How Chapter 13 Bankruptcy can STOP Repossession & Lower Car Payments

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Dealing with overwhelming debt can be a stressful and challenging experience. If you’re struggling to make your car payments and considering bankruptcy as an option, Chapter 13 bankruptcy can provide a viable solution. This blog post will explore how Chapter 13 bankruptcy can stop car repossessions and help lower your car payments, providing you with the opportunity to regain control of your finances and move towards a fresh start.

Understanding Chapter 13 Bankruptcy:

For people who have fallen behind on their car payments and the lender is trying to repossess the car, Chapter 13 stops the repossession and allows them 5 years to pay off the loan. For people who have had a vehicle repossessed in the past 3 weeks, Chapter 13 will even allow us to get that car back for them. Chapter 13 bankruptcy, also known as a wage earner’s plan, allows individuals with regular income to create a repayment plan to settle their debts over a period of three to five years. Unlike Chapter 7 bankruptcy, which involves liquidating assets to pay off debts, Chapter 13 focuses on restructuring and repaying debts based on your income and ability to pay.

The Benefits of Chapter 13 Bankruptcy for Lowering Car Payments:

  1. Cramming Down the Loan: One of the significant advantages of Chapter 13 bankruptcy is the ability to “cram down” your car loan. If you owe more on your car than it is currently worth, you may be able to reduce the loan balance to match the vehicle’s fair market value. This can lead to a lower monthly payment and save you a substantial amount of money in the long run.
  2. Reducing the Interest Rate: Chapter 13 bankruptcy also provides an opportunity to lower the interest rate on your car loan. In some cases, if the interest rate on your original loan is higher than the statutory rate, you may be able to adjust it to a more favorable rate through the bankruptcy process. This can result in substantial savings over the life of the loan and make your monthly payments more affordable.
  3. Extending the Repayment Period: Another way Chapter 13 bankruptcy helps lower car payments is by extending the repayment period. While the original term of your car loan may have been relatively short, such as three or four years, Chapter 13 allows you to stretch the repayment period up to five years. By spreading out the payments over a longer duration, your monthly obligation can decrease, making it more manageable for your current financial situation.

Important Considerations:

It’s essential to consult with an experienced bankruptcy attorney to fully understand the implications of filing for Chapter 13 bankruptcy and how it will impact your car loan. Here are a few key points to consider:

  1. Eligibility and Qualification: Chapter 13 bankruptcy has certain eligibility requirements, including a regular source of income to meet the repayment obligations. An attorney can help assess whether you meet these qualifications.
  2. Automatic Stay Protection: When you file for Chapter 13 bankruptcy, an automatic stay is put into effect, which halts any collection activities, including repossession of your vehicle. This can provide temporary relief while you work on restructuring your debt.
  3. Staying Current on Payments: Throughout the Chapter 13 repayment plan, it is crucial to stay current on your car payments and fulfill your obligations. Failure to make the required payments can result in the lender seeking relief from the bankruptcy court to repossess the vehicle.


Chapter 13 bankruptcy offers individuals struggling with debt an opportunity to regain control of their finances and lower their car payments. By cramming down the loan, reducing interest rates, and extending the repayment period, individuals can find relief and make their monthly obligations more manageable. However, it’s crucial to consult with a knowledgeable bankruptcy attorney who can guide you through the process and help you determine the best course of action for your specific situation. Remember, bankruptcy is a complex legal process, and professional advice is essential to ensure you make informed decisions and protect your rights .For more information, visit us at or call 913-422-0909 to make an appointment with one of our experienced attorneys. At WM Law, we are here to help.

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Jeffrey L. Wagoner


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