Filing chapter 13 bankruptcy will stop car repossession and allow you to resume normal payments on your car and pay the back car payments through the bankruptcy court. In some cases, a debtor can reduce car a car payment and restructure a car loan through the chapter 13 bankruptcy plan filed with the court.
A chapter 13 debtor can pay the back payments owed on a car through the chapter 13 plan and continue to make current payments on the car loan directly to the lien holder for the car. A chapter 13 debtor can also choose to pay the entire balance of the car loan through the chapter 13 bankruptcy plan. If a car loan is paid through a chapter 13 bankruptcy plan, the interest rate on the car loan can be greatly reduced from the contract rate. In some cases, car loan interest can be reduced to as little as the prime rate plus 1%. Depending on the date the car was purchased, a debtor may even be able to reduce the car payment by paying the value of the car through the chapter 13 plan filed with bankruptcy court.