Bankruptcy, Entire Car in Your Plan, and When Collectors Don't Follow The Law

July 22, 2010 - PRLog -- One of the options a Debtor has when she files a Chapter 13 is how she wants to pay for her car. She can either continue to pay the car directly to the car company or she can put the entire balance of the car in her Chapter 13 bankruptcy plan.

Putting a car in the bankruptcy has some benefits and some disadvantages. One of the benefits, depending on how much longer you have to pay on the car, is you get to spread the payments out over another 60 months (in most cases) – even if you only have 2 years left to pay on the car. As is required by your purchase agreement, a Debtor must keep full coverage insurance on the vehicle with the car creditor as a lien holder. Another benefit to most debtors is the interest rate currently is usually 9.25% on the car. Many debtors had bad credit when they bought the car so have a higher interest rate. Finally, if the car was purchased over 910 days from when you filed bankruptcy, you can pay the car creditor for the value of the vehicle or the value, whichever is LESS. In some this can take off a couple thousand dollars in the amount being paid to the car creditor.

However, there are some disadvantages. The main one being, the Trustee gets 10% of all money he brings in. So, even though you are only paying 9.25% interest on the car, you are paying an additional 10% to the Trustee. Another disadvantage is that you must remain current on your Trustee payments or the car creditor can and most likely will file a Motion to Lift the Stay. This means you must get current and stay current with the Trustee or the car creditor will be able to repossess the car.

The most important thing to know about putting a car in your plan; it must be a car you are purchasing and not leasing. Only arrears on a leased car can be put in your plan, not the entire amount left on the contract.

Debtors need to weigh all their options before they decide how they want to pay for their car while in bankruptcy. Consider all the pros and cons before making a decision.

In the event a debt collector violated the Fair Debt Collections Act you have the right to sue the collector in state or federal court. It has to be done with in one (1) year from the date the law was violated. If by chance you win, you may actually recover money for the damages that you have suffered plus an additional amount. Court cost and attorney’s fess also can be recovered at that time. As an individual or as a group you have the right to sue a debt collector and recover for damages ranging in the six (6) digits or by one (1) percent of the collector’s net worth, whichever the court find lesser.

For more information visit http://www.bankrupcy-alternative.com/bankruptcy-effects.html or call us directly. Here is another bankruptcy article http://www.prlog.org/10809244-bankruptcy-and-what-happens... and here is another http://www.prlog.org/10809237-bankruptcy-chapter-13-wage-... for your reading enjoyment.

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