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Chicago Bankruptcy Question: Can Chapter 13 bankruptcy stop a repossession?

Chicago Bankruptcy Question of the Day: Can Chapter 13 bankruptcy stop a repossession?  Keeping a vehicle from being repossessed when you are behind on payments is one of the major reasons that people file for Chapter 13 bankruptcy, so yes, it can.  In Illinois, if you are more than thirty days behind in your car payments, the finance company has the right to repossess your vehicle.  Usually they do not move this quickly and will not attempt to recover the vehicle until you are more than sixty days behind in the payments, but not always, so if you are behind on your car payments you must be careful and act quickly.

When you file for Chapter 13 bankruptcy protection in the Chicago area and are behind on one or more financed motor vehicle payments, repossession is stopped immediately upon filing.  The bankruptcy court issues the automatic stay of bankruptcy as soon as your case is filed, which is an injunction against all of your creditors that requires your creditors to cease any and all collection actions, including repossession.  So long as you maintain payments under the plan, full coverage insurance is maintained on the vehicle and everything else in the case goes as planned, the vehicle remains protected throughout the Chapter 13.

How the vehicle is treated within the Chapter 13 plan depends primarily on how long you have had it.  If you financed the vehicle more than 910 days before the date of filing, then the vehicle can be subject to a cram-down.  This means that you will only have to pay back the value of the vehicle, not the full amount owed, as a secured claim.  This could potentially save you thousands of dollars.  If the vehicle was financed less than 910 days before the date of filing, then the full amount of the loan will have to be paid back as a secured claim.  It is still possible to significantly reduce the interest rate and monthly payment, just not the balance owed.

If you are in danger of having your vehicle repossessed, filing for Chapter 13 bankruptcy could be the best option for you.  Having an experienced Chicago bankruptcy lawyer representing you is important to make sure that you can take full advantage of the potential savings available to you.  At Ledford & Wu, we are always willing to take the time to offer you a free consultation with one of our experienced bankruptcy attorneys to review your options and see if filing for Chapter 13 is the right option for you.

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