One of the things Tyler, Texas, residents frequently are willing to take out a loan on is a new or gently used car. After all, relatively few families are blessed with having the thousands of dollars in savings that it takes to purchase a vehicle when they need one, and cars are an essential part of daily life for most residents of this city.
The bad news is that a car loan, much like a mortgage, is what is called a secured debt. This means that in the event of financial hardship and bankruptcy, a Texan may well be able to escape a lawsuit over the car loan, but they still have to return the vehicle or make the payments, payment which, oftentimes, put a real pinch on already tight budgets.
A Chapter 13 bankruptcy can in the right circumstances be a great tool for getting relief from an expensive car loan. More specifically, if the car is worth less than the balance of the loan, which is often the case since cars depreciate, then a Chapter 13 debtor can elect to pay only the value of the vehicle as a secured debt and, treat the remaining balance as an unsecured debt.
The net effect of this approach is usually that the debtor saves thousands of dollars on the loan balance, as only a portion of unsecured debts have to be repaid in a Chapter 13, assuming they get repaid at all. The secured portion of the debt gets broken up as part of the monthly Chapter 13 repayment plan.
Unfortunately, not every car loan is eligible for this sort of treatment. A debtor who is contemplating bankruptcy should speak to his or her attorney about whether the option described in this post is right for him or her.