Oregon considers car-related debts as secure debts. This means that the vehicle itself serves as collateral and lenders have the right to repossess it if you fail to pay the loan. Filing for a Chapter 13 bankruptcy temporarily stops lenders from doing this.
Chapter 13 is a form of debt reorganization that allows people to settle their balance over the course of three to five years. This makes it a very good option for people who own vehicles they are still paying for.
To be eligible, you must have a regular income, your unsecured debts cannot exceed $465,275 and your secured debts cannot go beyond $1,395,875. However, even if Chapter 13 protects vehicles from repossession through an automatic stay, you must still pay off your debts.
How to handle car-related debts?
You will still need to pay off your debts even if you keep your vehicle after filing under Chapter 13. In some cases, the court might reduce interest rates on people who have filed for Chapter 13 bankruptcy to give people the opportunity to recover financially as they pay back their debts.
People can also surrender their vehicles to the lender. By surrendering the vehicle, any deficiencies are treated as unsecured debt within their repayment plans. To prevent this, a lot of people get cramdowns.
What is a cramdown?
Sometimes, when you take a loan to purchase something that you want, the balance of the loan greatly exceeds how much you actually need. When it comes to car-related debts, you can opt for a cramdown instead of having to pay back such a massive debt, provided you have owned the car for at least 910 days. This process helps them reduce the principal balance of a debt to the fair market value of the collateral.
This eliminates the deficiency balance, meaning you can spend less on your payments and avoid high interest rates. Cramdowns help debtors by making their secured loans more manageable, making it easier for them to retain the assets they need to make a financial comeback in the event they lack the funds to pay back their loans.
Seeking legal guidance
Navigating Chapter 13 bankruptcy can be difficult without guidance from a professional. Many people consult their attorneys to help them make sense of the laws and limitations concerning their debts, as well as what their rights are.
