Tag Archives: Chapter 13 Bankruptcy

You Can Get Rid of Your Car Title Loan By Filing For Chapter 13 Bankruptcy


If you have a title loan and are paying 20% or more in interest for the life of the loan you should really consider filing for Chapter 13 bankruptcy and reducing the percentage rate to around 5%. Yes, only around 5%. So you can get rid of your title loan, pink slip loan or equity loan by filing for chapter 13 bankruptcy. The chapter 13 plan reorganizes the debt owed and more or less gives you a new loan for 36 or 60 months depending upon your circumstances under reasonable terms. We have recently had an epidemic of clients with horrible title loans. The monthly car title loan payments were $1,710 and $2,100 respectfully. The percentage rates were above 80%! The highest cash for cars percentage rate we have ever witnessed in writing was 1,000 % interest. How can this be legal in California? Why have your state legislators not made this type of loan illegal?

What happened to state usury laws limiting interest rates?

First of all California title loan or cash for car loans are operating within a loophole in California usury law limiting interest rates. I previously wrote about the downfall of most state usury laws placing a cap on credit card interest rates. See www.westcoastbk.com/blog/2012/07/how-can-credit-card-companies-charge-such-high-interest-rates/ Our Supreme Court of the United States held in Marquette National Bank v. First of Omaha Corporation, 439 U.S. 299 (1978) that a bank could charge interest to customers allowed by the state law where the bank was located, not according to the limitations placed by the usury laws of the state the customer lived in. So what happened? A few states eliminated their usury laws limiting interest rates in that state. Banks then set up shop in the states without usury laws and charged their credit card customers higher credit card interest rates throughout the United States.

If you actually look up California State Usury Laws good luck. There are so many exemptions to the rule why have the rule at all? Title loans or equity loans are perfect example of a loophole being taken advantage of. Just because it is technically legal does that make it right? Our system works better when there is capitalism with a conscience. How can charging 99% interest ever be acceptable?

What is a title loan or cash for cars loan?

A title loan is when you have the pink slip for your vehicle because the vehicle has no outstanding loan but the owner of the vehicle needs some quick cash to take care of some other expense that must be paid soon. The title loan company will take the title to your vehicle and hold it until you pay off the loan. Now they have you and do whatever they want to you. Do you believe or think someone trying to obtain a car for cars or title loan has the money to fight when they are overcharged interest or payments are not properly accounted for? No, there is no recourse in most circumstances. I do not know the percentage of the vehicles repossessed for nonpayment on these title loans, but I have to believe these title loan companies are repossessing a lot of vehicles and making a killing auctioning them off. Or, title loan companies are making a killing charging additional fees for missed payments and stringing the loan out more and more making you pay more and more to get your vehicle title back.

How can Chapter 13 Bankruptcy Help?

There are many ways filing for Chapter 13 Bankruptcy will help you deal with horrible cash for cars or title loans. The first is permanently reducing the interest rate to hopefully around 5%. For example let us say you obtained a title loan about 6 months ago for $4,000 at 99% interest over 36 months. The monthly payment will be about $350.18 a month for 36 months or a total paid of $12,606.48 for the original $4,000 loan received. When filing for chapter 13 bankruptcy, assuming the principal balanced owed at the time of filing is around $3,650, you will pay that principal back at 5% or approximately pay $110 a month in the Chapter 13 Plan for the vehicle loan until the chapter 13 plan is completed in 36 months. And this is all by federal court order. You need to add in bankruptcy attorneys fees and the Chapter 13 Trustee fee to truly calculate the monthly chapter 13 plan payment.

If you really want to get into this topic and how the interest rate can be reduced so much, research topics dealing with the hanging paragraph of Section 1325(a)(9) and its interaction with Section 1325(a)(5) of the Bankruptcy Code. Most bankruptcy lawyers will talk about a vehicle being a 910 day vehicle loan or not.

Second, the amount you pay back on the loan could be reduced depending upon the value of the vehicle and the amount of the title loan.

Third and most important is you will no longer make the payments directly to the car title or equity loan company. Your loan payment will be paid through the chapter 13 plan and by the chapter 13 trustee. This should prevent any funny business with accounting for payments being made and ensure you will get your pink slip back after completing the chapter 13 plan. In the real world you will be at the mercy of the title loan company accounting for your payments properly and being honest about whether you completed the loan and should receive your pink slip back. Take a few minutes and research how many people have problems getting their pink slip back. No doubt someone is getting screwed right now.

Can I Incur New Debts While in a Chapter 13 Bankruptcy?

By Ryan C. Wood

When you are in an active Chapter 13 bankruptcy case there are limits to what you can or cannot do. You cannot simply continue doing what you would normally do as if you did not file for bankruptcy. There is a Chapter 13 trustee assigned to your case. This trustee is the person that is responsible for administering your Chapter 13 case. If there are certain things that you want or need to do you will need to ask the trustee or the court’s permission depending upon the circumstances and jurisdiction. To make sure you stay on track and not get in trouble with your Chapter 13 bankruptcy trustee, here are some things that bankruptcy attorneys may advise you on.

Buying a New Car

Generally you are allowed to incur new debt for the purchase of a vehicle. If the vehicle you owned at the time the case was filed breaks down or become unreliable you need a new car. Just because you filed for bankruptcy protection does not mean you cannot have reliable transportation to get to and from work and live life. You will need to notify your bankruptcy lawyer and obtain a letter from the trustee’s office providing permission to incur the new debt. This is a jurisdiction to jurisdiction issue though. So your local Chapter 13 Trustee may have different procedures in place.

Credit Cards

You cannot have or use or open any credit cards while you are in an active Chapter 13 bankruptcy. You need to cut up all your credit cards in your possession when you file for bankruptcy. This makes sense since the Chapter 13 trustee would not be able to administer your estate effectively if they are paying your creditors from your Chapter 13 plan payments while you continue to accrue new debt.

Borrow Money

You cannot borrow money from any sources, usually over $600, without permission from the Chapter 13 trustee. In some jurisdictions you need to obtain permission from the bankruptcy court in order to borrow money. You should consult with a bankruptcy lawyer in your area to determine whether you need permission from the Chapter 13 trustee or the bankruptcy judge to borrow money. Here are some examples: refinancing your mortgage, trying to obtain student loans, financing a car, borrowing from your 401k, borrowing funds to make home improvements. There may be many things you need to borrow money for since life continues moving on after you file your bankruptcy case. The important thing is to contact your bankruptcy attorney first before doing anything so that your attorney can advise you on what you need to do.

Selling Your Home

If you need to sell your current home you need permission from the bankruptcy court in order to do so as it is a major asset in your bankruptcy estate. Failure to obtain permission from the court to sell your home may result in having the entire transaction voided.

The above examples are only a portion of the things you cannot do or need permission in order to do while you are in bankruptcy. The best way to ensure you are not inadvertently violating any rules is to consult with your bankruptcy lawyer before doing anything major that involves your finances while you are in bankruptcy.

Information About Filing a Chapter 13 Bankruptcy Case

By Ryan C. Wood

When people think about Chapter 13 bankruptcy cases, most people think that it is the bankruptcy chapter under which they are forced to pay all their debts back and are stuck with the payment for the duration of the Chapter 13 plan.  It is information like this that sometimes prevents people from seeking the advice about bankruptcy.  This article was written to provide you with more information and insight into Chapter 13 bankruptcy cases.

Do I Have to Pay Back All My Creditors?

Many people do not seek the advice of bankruptcy attorneys because they think that they have to pay back all their debts in a Chapter 13 plan.  This is not always the case.  The amount you pay in a Chapter 13 plan depends on a variety of factors such as: your monthly disposable income, if there are any unprotected assets and the amount of missed secured debt payments (such as mortgage or car payments).  Some people pay back 0% of their unsecured debts while others must pay 100% of their unsecured debts.  It just depends on your financial circumstances.

Why Should I File a Chapter 13 Bankruptcy?

There are many reasons why people file a Chapter 13 bankruptcy.  One of the most common reasons to file for a Chapter 13 bankruptcy right now is the ability for consumers to strip, or get rid, of their junior liens from their real estate.  For this to be possible the value of your property must be worth less than what is owed on your first mortgage.  With the current economy there are a lot of underwater mortgages out there that can be removed forever.  Consumers can strip their home equity lines of credits or other junior liens that may range anywhere from $10,000 to $200,000+.  That is a substantial amount of savings.  Another reason to file a Chapter 13 bankruptcy is to save a home from foreclosure by paying back missed mortgage payments in the Chapter 13 plan.  This allows the missed mortgage payments to be spread out in the Chapter 13 plan over 3 to 5 years instead of having the entire amount payable immediately.  A third reason to file a Chapter 13 case is to repay priority tax debt in the Chapter 13 plan.  Generally taxes that are not more than three years old are not dischargeable in bankruptcy, a Chapter 13 plan allows them to spread out that payment for 3 to 5 years.  These are just a few of the reasons to file a Chapter 13 bankruptcy case.

Am I Stuck in a Chapter 13 Plan for the Duration of the Plan?

Circumstances can change at any time.  Fortunately, Chapter 13 bankruptcy cases are fairly flexible.  If your financial situation changes, such as loss of job, decrease in income, increase in expenses, or any other change, you can always modify your Chapter 13 plan to reflect the changes in your financial situation.  If the changes are significant enough you may even convert your Chapter 13 bankruptcy case to one under Chapter 7.

Can I Voluntarily Dismiss My Chapter 13 Plan?

There may be many reasons why you would want to dismiss your Chapter 13 plan.  Luckily, under 11 U.S.C. §1307, you can voluntarily dismiss your Chapter 13 plan at any time as long as you have not previously converted your case from a Chapter 7, 11, or 12.  Chapter 13 cases are usually fairly complicated and it is recommended that you seek the advice of an experienced attorney to help you navigate through your Chapter 13 case.