Recently, I consulted with a Peoria bankruptcy client about filing bankruptcy.  He was behind on his car payments.  The client was certain the car lender would soon be repossessing his car that he used to travel to and from work.  He asked me, “can bankruptcy prevent my car from being repossessed?  If so, what type of bankruptcy should I file?”  I told my Peoria client that, “yes, if you file a Chapter 13 bankruptcy, you will be able to prevent your car from being repossessed, and you will be able to make up any payments you have missed while you are in the Chapter 13 plan.”

“But what if the car lender repossesses my car before I am able to file the Chapter 13,” he asked.  I replied that if he acted quickly to have his Chapter 13 bankruptcy filed – normally within 21 days of having his car repossessed in Illinois – the bankruptcy court would require the car lender to return the car to him.  The Chapter 13 bankruptcy would permit my client to catch up his payments during the Chapter 13 plan, and he would be able to keep his car for his job.  Better yet, if my client chose to make his car payments through the Chapter 13 plan, my Peoria client would be able to pay off his car loan at an interest rate of 5.25%.  This rate was nearly 15 percentage points lower than what his current car loan provided.  Imagine the savings!  In some cases, the Chapter 13 monthly plan payment is no more than what the client was paying each month to the car lender before filing for bankruptcy.  Plus, he is eliminating all his other debt, at the same time.

Chapter 13 bankruptcy plans are unique in allowing debtors to save cars from being repossessed and sold when a debtor has had a temporary run of bad luck.  Chapter 13 bankruptcy plans can also be used to save a home from being foreclosed upon when the homeowner has fallen behind on her mortgage payments.  The important thing to remember if you fall behind on car or home mortgage payments is this:  Don’t wait to take action.  The sooner you act, the better.  Chapter 13 bankruptcy is designed to solve financial problems with affordable monthly payments.  And, while you are saving your car or home, you are eliminating all your other bothersome debts such as credit cards, medical bills, or personal loans, 100%.  Once your other debts are eliminated, that will make it that much easier to stay current in the future on your car payments or your home mortgage payments.  This was the perfect solution for my client.