Florida residents who are experiencing financial difficulties are often unsure of how to improve their situation. One fear they could have involves retaining certain properties such as a home or a motor vehicle in a bankruptcy case. Understanding the bankruptcy process with these issues is important.

The most common forms of consumer bankruptcy are Chapter 7 and Chapter 13. Chapter 7 is a liquidation process where property can be kept only in certain circumstances. With Chapter 13, however, there is a payment plan in which the debtor can keep properties like a car. There are three alternatives to retain a car under Chapter 13 bankruptcy law. With the automatic stay, debtors are immediately protected from debt collectors. This means that the lender cannot repossess the vehicle.

Chapter 13 can give the debtor the opportunity to catch up on payments they have missed. The repayment plan as part of the Chapter 13 allows this. The vehicle can be retained and the loan paid off. Finally, there is what is known as a “cramdown.” With a cramdown, the amount owed can be reduced so that the debtor is paying for the vehicle’s value. The debtor qualifies for a cramdown if what is owed is significantly higher than the vehicle’s value or if it was purchased more than 30 months prior to filing. The amount between the loan and the vehicle’s value will then be unsecured debt.

It is also possible to purchase a vehicle during a Chapter 13 bankruptcy. The trustee must approve of the purchase, and the prospective buyer must find a car dealer that offers auto loans for people during bankruptcy. Understanding all aspects of bankruptcy is imperative when thinking about filing. A law firm that is experienced in bankruptcy law may be able to help with the case.