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Are titles loans considered bankruptcy? Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our goal is to help you make better financial choices by providing you with interactive tools and financial calculators that provide objective and original content, by enabling you to conduct research and compare data for no cost – so that you can make informed financial decisions. Bankrate has agreements with issuers, including but not limited to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Earn Profit The offers that appear on this website are provided by companies who pay us. This compensation can affect the way and when products are featured on this site, including for instance, the order in which they be listed within the categories of listing and other categories, unless prohibited by law. This applies to our loans, mortgages,, and other home lending products. But this compensation does not influence the content we publish or the reviews that you read on this site. We do not contain the vast array of companies or financial offerings that could be available to you.
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3 minutes read. Published on March 7, 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.
Edited by 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 confidence to control their finances by providing clear, well-researched information that breaks down otherwise complex topics into manageable bites.
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When you’re in debt or need money to pay for bills, bankruptcy may appear like a great way to access cash quickly. But suppose your money troubles become unmanageable, and you end up filing bankruptcy to settle your obligations. How will the car you signed over to secure the title loan? Depending on whether you decide to pursue it, it could become possible to incorporate your title loan in bankruptcy filings and get the loan discharged or restructured to provide more manageable payments. You could also lose your car if you can’t meet loan repayment terms. Title loans and Chapter 7 bankruptcy Chapter 7 bankruptcy is often referred to as liquidation. In Chapter 7 filing, unsecured debts are discharged. This includes medical debt as well as personal loans and even promissory notes. In the course of this process, the property you are not exempt from will be sold, and the proceeds are used to pay off creditors. A title loan, however, is not an unsecure loan; it is . If you are able to borrow money with an auto title loan, you sign over the vehicle to the lender to secure the loan. In plain English you signed that pink slip the car in exchange for a sum of money. Because it’s a secured loan the title loan can’t be removed as part of Chapter 7 bankruptcy. “Although state laws vary in some cases, all secured loans remain in force,” says Michael Sullivan who was a former personal financial consultant at Take Charge America, a non-profit credit and financial counseling firm. Because the loan remains in force, you’ll require to repay it in its whole or come up with an affordable payment plan together with the lender who holds the title loan. If neither of these options is feasible, you may opt to . There are other instances in which the courts can permit title loans to be considered 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 loans that are predatory and title loans are often considered to be expensive,” says Hawkins, saying that in some instances the court will “rewrite the loan at a market rate dependent on the worth of the vehicle, and 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 the vehicle as a source of transportation.” Bankrate tip
Be sure to keep making the required payments prior to and after your bankruptcy case closes to avoid repossession.
title loans as well as Chapter 13 bankruptcy Chapter 13 bankruptcy is restructuring your debts, and this process includes secured debts like car title loans as well as mortgages. In Chapter 13, some unsecured debts may even be granted forgiveness. If they are not, they are reorganized, and are paid back in time. “Chapter 13 lets you create a repayment plan where you pay money every month into the trustee. So that at the end period of repayment,, you have either paid the fair market value of the car in accordance with the date on which when the bankruptcy case was initiated … or amount owed, whichever is less,” says New Jersey bankruptcy lawyer Edward Hanratty. In the Chapter 13 filing, you might also be able to lower the amount of the monthly installment payments you’re required to make in order to lower the cost of these payments. Additionally, if the interest rate on the title loan is excessive it is possible that you will be able reduce the rate as part of your Chapter 13 process, says Dai Rosenblum, a Pennsylvania bankruptcy attorney. While there is the possibility of losing your car as part of Chapter 13 bankruptcy filings, you have far more options available for restructuring your debt to avoid this from occurring. Tell your lawyer about your title loan prior to filing bankruptcy through the assistance from an attorney you need to be transparent about all your assets along with the current debts and obligations, including your title loan. In the absence of revealing your title loan could lead to more difficulties. “When you file bankruptcy in bankruptcy, you declare under the criminal penalty of perjury — that you have included every asset, including the vehicle, and each debt, even your loan on your title loan,” says Rosenblum. “Also lawyers can’t fix an issue if they don’t be aware of the issue.” Additionally, hiding debts during a bankruptcy case could lead to the dismissal of your case. “Or in the most extreme scenario this could lead to prison time in bankruptcy for fraud” says Hanratty. “It’s safer to be secure rather than regretting this.” The final word: Car title loans are solvable through bankruptcy, but how this kind of debt is dealt with will depend on whether you’re going to pursue Chapter 7 or Chapter 13 bankruptcy. The options include having the debt restructured, paying the debt back entirely or surrendering this vehicle over to the lender. Before you take any step, make sure you consult an attorney in bankruptcy who will help you sort through the options and determine the most effective course of action.
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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 take control of their finances with precise, well-studied facts that break down complex topics into manageable bites.
Auto loans editor
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