Can I modify my Chapter 13 plan so that I pay more ofmy student loans bysurrendering my car?

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Can I modify my Chapter 13 plan so that I pay more ofmy student loans bysurrendering my car?

I am currently in Chapter 13. I have student loans that won’t discharge at the end of the plan. I no longer need my car that is financed and that is in the plan. We filed Chapter 13 with the thought of keeping the car so the plan is paying a lot to the finance company. Could I give back the car to finance company and modify the plan to pay more student loans? Or will finance company object and win no mater what?

Asked on July 18, 2011 under Bankruptcy Law, Kentucky

Answers:

MD, Member, California Bar / FreeAdvice Contributing Attorney

Answered 9 years ago | Contributor

Even if you surrender your motor vehicle that still has an existing active loan on it, the car may not bring in enough at re-sale or auction to pay off your existing car loan. If it doesn't, you need to find out if your state allows for deficiency judgments because if it does, you may be required to pay the extra amount due. For example, if you owe $5,000.00 and the car at auction only brings in $4,000.00, you would still owe $1,000.00. Talk to your motor vehicle sales finance company and see if it can refinance the car to a lower rate or help you in figuring out what your next steps could be. Since you are in Chapter 13, I don't believe you can treat one creditor more preferably than the other. Talk to your trustee and see what options you have overall. You are reorganizing and it may be better for you to keep the car but you won't really know until you have done all the research to make an informed decision.


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