In bankruptcy code, obtaining a loan based on your car title (title pawn) may not be treated the same as taking out a loan to purchase a car. You are, however, obligated to disclose all debts that you owe when filing your bankruptcy paperwork. Therefore, if you file bankruptcy and you have a title loan, you will be required to disclose information pertaining to the transaction.
What is a Title Pawn?
When you obtain a title pawn (or title loan), you are basically receiving money from a lender in exchange for the title of your vehicle. Typically, you will sign paperwork with the lender for a short-term loan (usually 30 to 90 days) and then the lender will put a lien on your vehicle’s title until you have paid the loan off. This is called a “secured loan” because you are providing the lender security interest in your vehicle for loaning you the money. If you default on your payments for the loan, the lender can legally take your car.
In bankruptcy, a loan that is taken out to purchase a vehicle is referred to as a “purchase money security interest. In contrast, a title pawn under bankruptcy code is referred to as “non-purchase money security interest.” Therefore, when you file bankruptcy these two types of loans will be treated differently.
How Does Chapter 13 Help Me Save My Title Pawn?
If you file Chapter 13 bankruptcy, you might be able to alter the terms of the title pawn. In most cases, you can have the principal balance of your loan decreased to the actual value of your car. Additionally, you should be able to get the interest rate reduced to current market rate, which is adjusted every year. Your payments for your title pawn are then added into your Chapter 13 repayment plan payments, you can keep your car, and when your bankruptcy case is over, you will be free and clear of the title pawn.
There are crucial steps in the process of your bankruptcy that need to be taken to ensure that you do not lose your vehicle to the title pawn lender, so you should seriously consider speaking to an attorney if you are thinking of filing bankruptcy. An experienced attorney will know how to structure your bankruptcy paperwork and file the proper motions during the proceeding to ensure that you do not lose your car.
Are You Considering Filing For Bankruptcy?
If you feel bankruptcy is the best option for your financial situation you need to speak with an experienced bankruptcy attorney as soon as possible. Please contact us online or call our office directly at 888.348.2616 to schedule your free consultation.