Auto In Bankruptcy

The New Jersey statute 39:6-35 permits the state to suspend a person’s driver’s license based on the failure to satisfy a judgment entered against this individual for causing a personal injury or property damage, with damages in excess of $500.00, as a result of the operation of a motor vehicle.
A chapter 7 or a chapter 13 bankruptcy filing allows this individual to reinstate their driver’s license. After the filing, the debtor must forward the bankruptcy case information to the appropriate NJ DMV office with a request to reinstate the license.
Additionally, the debt may be discharged and eliminated in a chapter 13 or chapter 7 bankruptcy case.
Robert Manchel is an experienced bankruptcy lawyer in NJ who may be contacted at (866) 503-5655.

The chapter 7 process is about 4 months. If the debtor meets the criteria, all dischargeable debt is discharged and eliminated. However, certain types of debt are specifically not discharged during bankruptcy. One type of debt that is not discharged are auto moving violation fines. This means that a chapter 7 bankruptcy filing does not effect such debt, which is still due and owing after the completion of the bankruptcy.
Also, the chapter 13 debtor may not eliminate such auto fines, as well. Typically, the township will consent to allow the fines to be paid through the bankruptcy plan. However, some townships are more difficult to deal with than others.
Depending on the bankruptcy judge, fines may be paid by the trustee, prior to payment of other types of debt. Other judges will not allow a trustee to pay the fines, until other types of debt has been paid and/or until after a certain number of months have elapsed after the bankruptcy filing.
A chapter 13 bankruptcy case will likely allow a debtor to reinstate his license, if his license is suspended solely due to a fine and/or surcharges. In other words, a debtor will not be able to reinstate his license, by way of a chapter 13 case, for the following reasons: failure to attend a court hearing; license is suspended as a result of a court penalty that specifically suspends a license for the violation. For example, the penalty for a DUI conviction, specifically suspends a person’s license for a certain time period. Under this scenario, a chapter 13 bankruptcy will not reinstate a person’s license. If a debtor’s license is suspended as a result of his failure to appear in municipal court, he must first resolve the municipal court issue.
If a person is filing a chapter 13 to restore his license, each municipality that is the cause of the suspension must properly notify the NJ Motor Vehicle Commission of their consent to restore their license upon the bankruptcy filing and that payment of the fine is be made through the bankruptcy plan.
Please note that there are municipal court administrators that are knowledgeable about this process and others who are clueless. This process may require a bankruptcy court motion.
Robert Manchel, the New Jersey bankruptcy lawyer, can be contacted at (866) 503-5655, to discuss the restoration of your license.

A chapter 13 bankruptcy filing may allow someone to get back their repossessed auto.
After the bankruptcy filing, the auto company will request proof of adequate auto insurance. The auto insurance must reflect that the finance company is covered as the loss payee or lien holder. This means the finance company is protected in the event of auto damage or theft. Typically, the insurance must include a deductible of not more than $500.00. If the debtor provides such proof, the auto finance company is required to turnover the vehicle to the debtor.
After the finance company receives proof of the bankruptcy filing and adequate auto insurance, the finance company will notify the debtor of the whereabouts of the vehicle. Typically, the debtor is permitted to pick up the auto with the repossession charges and storage fees to be paid through the monthly bankruptcy plan payments.
In order to keep the auto, the debtor must file a feasible chapter 13 bankruptcy petition and plan that provides for sufficient payments of the financing. In general, the debtor may have three payment options for the financing, under certain circumstances. The first option permits the debtor to pay the total amount of arrears, at the time of the filing, through the monthly trustee payments, while making the future monthly payments directly to the finance company. The second option is to pay the total amount due on the financing through the monthly bankruptcy plan payments. Under this scenario, the debtor must pay an additional sum for interest on the vehicle.
The third option permits the debtor to pay only the fair market retail value of the vehicle, through the bankruptcy plan, plus an additional sum of interest. This option is called a cramdown for the auto finance agreement, which is limited to specific situations. If the debtor meets the criteria, he is permitted to eliminate the difference between the value of the vehicle and the balance due on the financing.
Also, the petition and plan must be feasible, which means that the debtor is able to provide proof that he is able to make the necessary monthly trustee and/or direct monthly finance payments.
Robert Manchel, the bankruptcy attorney in New Jersey, may be contacted at(866) 503-5655.

A debtor may redeem their auto in a chapter 7 bankruptcy. This means that a debtor may keep their auto by paying to the finance company, either the balance on the loan, or the value of the auto, if the finance payoff exceeds the auto’s value. Unless both parties agree otherwise, the payment must be made in a lump sum.
Obviously, the debtor wishes to keep the auto by paying the least amount to the finance company. Therefore, if the finance payoff balance is more than the value of the auto, the debtor may keep the auto and eliminate the lien and financing, by paying the value of the auto. This means that if the auto has a value of $8,000.00 and the finance payoff is $10,000.00, the debtor may keep the auto, and eliminate the lien and financing, by making a lump sum payment of $8,000.00.
There may be an issue regarding value. If all parties cannot settle on the value amount, the parties may hold a hearing for the judge to determine the value. Each party may present their appraisal and expert to support their figures.
Redemption is unusual. Typically, a debtor will keep their auto by continuing to keep and pay the auto financing, the same as if no bankruptcy case was filed.
There are many questions people have relating to their vehicle and how it’s impacted by bankruptcy. Robert Manchel, a NJ Bankruptcy Lawyer, is available to discuss your questions at (866) 503-5655.

In a chapter 13, a person has options as to how they may pay their auto payments during bankruptcy. They may make their payments, as follows:
A. Make payments monthly payments directly to the finance company;
A. If they are behind with payments, they may cure their pre-filing arrears through the bankruptcy payments and make their regular future monthly payments directly to the finance company;
C. Pay the entire balance due through the bankruptcy plan; and,
D. Under certain situations, pay to the finance company only the amount equal to the value of the vehicle, at the time of the filing, through the bankruptcy plan.
Please note that the debtor may only apply scenario D under specific situations.
Under scenarios A and B, the monthly payment to the finance company is the same, as if the person is not in bankruptcy. The interest payment is the same, as well. Under scenarios C and D, the interest rate is determined by the prime rate at the time of the filing, plus an additional interest of 1% through 3%, based on the risk that the debtor will not make the payments. The risk is based on the circumstances of each debtor. This means that the interest rate will be a total of 3% at the lowest and 6% at the highest.
Under scenario C, the debtor will pay the balance due, plus the interest rate explained above. Under scenario D, the debtor will pay the retail value of the vehicle, at the time of the filing, plus the interest rate explained above. At the time this blog is written, finance companies are permitting 4.25% to 4.75% as interest rates for first time chapter 13 debtors, under scenarios C and D above.
Robert Manchel, a reputable NJ bankruptcy lawyer, is available to discuss your bankruptcy questions at (866) 503-5655.

How can bankruptcy save an automobile from the finance company?
Typically, if a person is about three months behind with their monthly auto finance payments, the finance company will commence the repossession process.
Theoretically, a chapter 7 or chapter 13 filing will stop the repossession of an auto, due to a default. However, only a chapter 13 will allow the debtor to keep the auto and cure the default. Also, if the auto has been repossessed, a chapter 13 filing, will require the finance company to transfer possession of the vehicle back to the debtor, if the auto has not yet been sold. This means that if the auto was transported to another state for auction, prior to the bankruptcy filing, the finance company must transport the auto back to New Jersey, after the filing.
To obtain possession of the auto, the debtor must provide proof of adequate insurance coverage that has a reasonable deductable and covers the finance company, as the loss payee, in the event of damage or loss of the auto. Also, the debtor must have filed a feasible chapter 13 bankruptcy plan with the court, that provides for payment of the financing. Depending on various factors, the debtor has various options regarding the payment of the financing. It may be possible to cure the arrears through the monthly bankruptcy plan, while making the future payments as they come due. The debtor may be able to pay the entire amount that is due on the automobile through the bankruptcy plan. Or, under certain scenarios, the debtor may be able to pay only the value of the vehicle, at a fair interest rate, through the bankruptcy plan. Under all scenarios, the debtor’s bankruptcy schedules must reflect the ability to pay the monthly trustee payments and/or direct payment to the finance company.
There may be various issues that arise when requesting the transfer of a repossessed auto back to the debtor, in addition to the above. After an auto is repossessed, the finance company will incur fees for storage, transportation, etc. The finance company will generally demand payment of all fees and costs prior to the transfer.
You can call NJ consumer bankruptcy lawyer Robert Manchel at (866) 503-5655 to discuss how bankruptcy can save your auto.