Facing the possibility of losing your car to repossession can be incredibly stressful, especially in a state like California, where having reliable transportation is essential. If you’re struggling to keep up with your car payments, you do have options.

When you’re at risk of losing your vehicle and not sure where to go, Chapter 13 bankruptcy may be your best option. Bankruptcy often gets a bad reputation, but it’s a tool that you can use to protect yourself and recover from what feels like insurmountable debt.

Chapter 13 Bankruptcy Can Protect You Against Repossession

Chapter 13 bankruptcy is a legal tool available to those at risk of losing their car. When you file for Chapter 13, an automatic stay goes into effect, which means creditors must halt all collection activities, including repossession efforts. This automatic stay can give you the time and space you need to get your finances back on track while keeping your vehicle safe.

Under Chapter 13, you have the option to continue making the original payments on your car until it’s paid off, with any missed payments (arrears) being included in your bankruptcy plan. This allows you to catch up on missed payments over time while retaining possession of your vehicle. Alternatively, you might be able to pay only the present value of the vehicle at a reduced interest rate through your Chapter 13 plan, making the payments more affordable.

The “Cram Down” Advantage

One of the most significant advantages of Chapter 13 bankruptcy is the ability to take advantage of what’s known as a “cram down” on your car loan. This provision is available if you’ve owned your vehicle for at least 910 days (approximately two and a half years). You would only need to pay the current retail replacement value of the car, rather than the full balance of the loan. This can potentially save you thousands of dollars, especially if the car has significantly depreciated since you bought it.

In addition to reducing the amount you owe, the cram-down can also lower the interest rate on your loan. This dual benefit can make your car payments much more manageable, helping you stay on top of your finances while keeping your vehicle.

California’s Strict Repossession Laws

California has some of the most restrictive repossession laws in the country, particularly when it comes to “self-help” repossession. This means that a lender or car dealer cannot simply hire a “repo man” to take your car without following specific legal procedures. These laws are in place to protect consumers from losing their vehicles without due process.

Before a lender can repossess your car, they must comply with California’s strict self-help laws or pursue another legal method to take the vehicle. However, even if your car has already been seized, you may still have options to get it back. By filing for Chapter 13 bankruptcy and working with an experienced California bankruptcy attorney promptly after the repossession, there’s a strong possibility that you can recover your vehicle and create a payment plan that works for your budget.

Protect Your Vehicle from Repossession with Hedtke Law Group

If you’re worried about the possibility of losing your car to repossession in California, it’s important to act quickly. Chapter 13 bankruptcy could be the solution you need to protect your vehicle and get back on solid financial ground. The team at Hedtke Law Group is here to guide you through the process with a caring and thorough approach.