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Are the title loans included in bankruptcy? Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our aim is to assist you make better financial decisions by providing you with interactive financial calculators and tools, publishing original and objective content, by enabling users to conduct studies and compare data for no cost and help you make informed financial decisions. Bankrate has partnerships with issuers such as, but not restricted to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Make Money The deals that are advertised on this site come from companies that compensate us. This compensation may impact how and where products are displayed on this site, including the sequence in which they be listed within the categories of listing in the event that they are not permitted by law. Our loan products, such as mortgages and home equity, and other products for home loans. This compensation, however, does affect the information we provide, or the reviews that you see on this site. We do not cover the universe of companies or financial offerings that could be open to you.
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3 min read Published 7 March 2023.
Writen by Mia Taylor Written by Contributing Writer
Mia Taylor is a contributor to Bankrate and an award-winning journalist who has two decades of experience and worked as a staff reporter or contributor for some of the nation’s leading newspapers and websites including The Atlanta Journal-Constitution, the San Diego Union-Tribune, TheStreet, MSN and Credit.com.
Editor: Rhys Subitch Edited by Auto loans editor
Rhys has been editing and writing for Bankrate since the end of 2021. They are passionate about helping readers gain the confidence to control their finances with precise, well-researched and well-researched content that breaks down complicated topics into manageable bites.
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If you’re struggling with financial trouble or require money to pay for bills, bankruptcy may appear like a great way to access cash quickly. But suppose your money troubles get out of hand and you end up filing bankruptcy to clear up mounting obligations. How will the vehicle you pledged as collateral in exchange for that car title loan? Based on the option you choose to pursue , it may be possible to include your title loan as part of a bankruptcy filing and get the loan dismantled or restructured to make payments more manageable. You could also lose your vehicle if are unable to meet loan repayment conditions. Title loans and Chapter 7 bankruptcy Chapter 7 bankruptcy is usually known as liquidation. In Chapter 7 filing, unsecured debts can be released. This includes credit card debt, medical debt as well as personal loans as well as promissory notes. In the course of this process, your nonexempt property will be auctioned off, with the proceeds are used to pay back lenders. A title loan, however, is not an unsecure debt, but it’s an unsecured debt . If you take out an auto title loan you transfer the vehicle to the lender as security for that loan. In simple terms, you signed over your pink slip the car in exchange for a sum of money. Because it’s a secured loan the title loan cannot be dismantled under Chapter 7 bankruptcy. “Although state laws vary however, generally every secured loans remain in the same position,” says Michael Sullivan who was a former personal finance consultant for Take Charge America, a nonprofit credit and financial counseling company. Because the loan is still in force, you’ll need to either in its totality or negotiate an affordable payment plan with the lender who owns the title loan. If neither of these options is available, you can opt to . There are also instances in which the courts allow titles loans to be dealt with as part of Chapter 7 proceedings, says Lamar Hawkins, a bankruptcy attorney with Guidant Law and member of the Arizona Board of Legal Specialization’s Bankruptcy Law Advisory Commission. “The bankruptcy court disfavors predatory lending and title loans tend to be expensive,” says Hawkins, adding that in some cases the court may “rewrite the loan to a market rate dependent on the worth of the vehicle, and also have the lender be able to make payments over time, so that the borrower will be able to retain the car and use it as an option for transportation.” Bankrate tip
Make sure to continue making the payments before the time the bankruptcy case has ended to avoid repossession.
Title loans as well as Chapter 13 bankruptcy Chapter 13 bankruptcy is restructuring your debts, and this procedure includes secured debts like car title loans as well as mortgages. In Chapter 13, some unsecured debts may even be forgiven. Those that are not forgiven are reorganized, and are repaid over time. “Chapter 13 permits you to make a repayment program where you pay each month to a trustee. In other words, at the end of the repayment plan, you have paid either an amount equal to the market price of the car as of the date that the case was filed … or amount owed in the case of lower,” says New Jersey bankruptcy attorney Edward Hanratty. In the Chapter 13 filing, you might also be able to reduce the amount of monthly installment payment you’re required to pay in order to lower the cost of these payments. In addition, if the interest rate on the title loan is very high, you may also be able to lower the interest rate through the Chapter 13 process, says Dai Rosenblum, a Pennsylvania bankruptcy attorney. While there is a risk of losing your vehicle as in Chapter 13 bankruptcy filings, there are many options for restructuring your debt in order to avoid this from occurring. Talk to your lawyer about your title loan prior to filing bankruptcy with the assistance by an attorney it’s important to be transparent about the assets you have, as well as all of your current debts and obligations, such as your Title loan. In the absence of revealing the title loan will only cause more challenges. “When you file for bankruptcy and declare under perjury penalties that you’ve included every asset, including the car, and every debt including that of the credit card loan,” says Rosenblum. “Also, a lawyer can’t fix a problem if they don’t be aware of the issue.” Furthermore, hiding debts during a bankruptcy case could result in its dismissal. “Or in the most extreme scenario this could lead to jail time for bankruptcy fraud,” Hanratty says. Hanratty. “It’s safer to be secure instead of regretting it.” The bottom line Car title loans are solvable through bankruptcy, but how this kind of debt is handled will be contingent on whether you’re going to pursue Chapter 7 or Chapter 13 bankruptcy. The options are having the debt restructured or repaid, paying the total debt or transferring this vehicle over to the lender. Before taking any action, consult with a bankruptcy attorney who can assist you in navigating your options and figure out the most effective course of action.
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Written by a Contributing Writer
Mia Taylor is a contributor to Bankrate and an award-winning journalist who has two decades of experience and worked as a staff reporter or contributor for some of the nation’s leading newspapers and websites including The Atlanta Journal-Constitution, the San Diego Union-Tribune, TheStreet, MSN and Credit.com.
The edit was done by Rhys Subitch Edited by Auto loans editor
Rhys has been writing and editing for Bankrate since the end of 2021. They are committed to helping readers gain confidence to take control of their finances by providing concise, well-researched and well-read information that breaks down complicated topics into bite-sized pieces.
Auto loans editor
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