When Life Interrupts Your Chapter 13 Case
Chapter 13 cases can last a long time, often up to five years. All kinds of things can happen during that time: jobs lost, jobs found, children come, children go, and unexpected medical expenses can arise. Most of life’s changes don’t affect a chapter 13 debtor’s case or the amount of money they are required to pay each month. A lost job may make meeting the chapter 13 obligations more challenging, but it is rare that such a loss of income (without a corresponding surrender of secured debt collateral) tacks your chapter 13 payment down at all. One particular event, however, does trigger a couple of different choices. What To Do If You Are A Chapter 13 Debtor Whose Vehicle Is Totaled? Scenario 1: Your vehicle was not subject to a lien. Please remember that the local rules of the Eastern District of North Carolina require you to obtain a court order prior to the acquisition of property or incurring of debt in excess of $7,500.00. It is not difficult for us to secure a court order for you so long as the Chapter 13 Trustee payments are current. If you would like for us to obtain a court order please tell us the proposed usage of the vehicle, the type of vehicle, whether the vehicle will be new or used, the maximum purpose price and the maximum monthly payment. Scenario 2: Your vehicle was subject to a lien and the Chapter 13 plan provided that the obligation be paid directly to the finance company. If the vehicle is being totaled and a deficiency will exist to the finance company after application of any insurance proceeds then please let us know so that we can attempt to modify your plan to extinguish the deficiency obligation. Please remember that the local rules of the Eastern District of North Carolina require you to obtain a court order prior to the acquisition of property or incurring of debt in excess of $7,500.00. It is not difficult for us to secure a court order for you so long as the Chapter 13 Trustee payments are current. If you would like for us to obtain a court order please tell us the proposed usage of the vehicle, the type of vehicle, whether the vehicle will be new or used, the maximum purpose price and the maximum monthly payment. Scenario 3: Your vehicle was subject to a lien and the Chapter 13 plan provided that the obligation be paid through the Chapter 13 Trustee. Option 1. The most simple option is to simply allow the insurance proceeds to be applied to the contractual liability owed to the finance company. If there is a surplus then you can use the funds as you see fit. We will modify the plan to extract that claim and the impact should be that your Chapter 13 Trustee payment is lowered. If there is a deficiency then we will modify to both extract the claim and reduce the monthly Chapter 13 Trustee payment but also to extinguish the deficiency obligation. Please remember that the local rules of the Eastern District of North Carolina required you to obtain a court order prior to the acquisition of property or incurring of debt in excess of $7,500.00. It is not difficult for us to secure a court order for you so long as the Chapter 13 Trustee payments are current. If you would like for us to obtain a court order please tell us the proposed usage of the vehicle, the type of vehicle, whether the vehicle will be new or used, the maximum purpose price and the maximum monthly payment. Option 2. If you will not be able to secure an acceptable vehicle without the use of the insurance proceeds derived from the former vehicle then we can attempt to substitute the collateral securing the claim of the finance vehicle. Your Chapter 13 Trustee payment will remain the same because the finance company will continue to enjoy its secured claim in the Chapter 13 case. The process of working with the insurance company and the finance company can be challenging and take as long as a few weeks to consummate. The vehicle you acquire must be of equivalent value to the vehicle that was wrecked and the transaction will be subject to the approval of the finance company.
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For more than 20 years, the Sasser Law Firm has been helping individuals and business owners sort through financial hardships to see the light at the end of the tunnel. Our North Carolina bankruptcy attorneys are all board-certified specialists, which means we have passed a complex exam, undergone a thorough peer review, and continue to earn legal education credits in this ever-evolving area of law.
