Surrendering a car under chapter 13

[bxpete]

I have a question about surrendering a car (secured load) under a chapter 13. We haven't filed yet, but I'm trying to decide if I should let the car be repossessed now and include the deficiency balance in the 13 as unsecured debt, or should I wait and surrender the car after filing the 13? Are there any benefits to waiting until after filing? Would the deficiency still apply if it's surrendered as PART of the 13 case instead of doing it before?

I've searched everywhere, but I can't seem to find any info regarding what happens when collateral for a secured loan is surrendered in a chapter 13. Specifically, will I still owe a deficiency balance like I would if it was repo'ed before the 13 is filed.

Any help would be appreciated...

[justbroke]

This is a great topic. Actually, since the BAPCPA was enacted in 2005 -- the latest Bankruptcy Code -- there have been two camps on whether deficiency can be applied to a so-called 910-vehicle.

A 910-vehicle is basically a motor vehicle purchased within 910 days of your Bankruptcy filing. For the last 2+ years, many Districts ave allowed a Debtor to surrender a vehicle in "full" payment of the underlying debt and no deficiency was allowed (to be claimed by the creditor).

That has all changed. Recently the 8th and 11th Circuit Courts have ruled that a deficiency claim is allowed by the lender on those vehicles... so that's not going to happen anymore.

However, it was fun while it lasted, as this technique was called making the lender "eat steel".

The only thing nice about surrendering during Bankruptcy is that the credit report entry will read IIB (Included in Bankruptcy) instead of a Repossession. The Repossession is worse on your credit report.

In the long run, if you were to surrender it prior to filing, the lender will still file a deficiency "unsecured" claim against your Bankruptcy estate. So, IMHO, it's best to just surrender it as part of your Bankruptcy.

[bxpete]

Makes sense. I was also hoping that the time limit for submitting claims may be on my side if I surrender it after filing the BK13. Maybe the credit union would not be able to get it sold and all the paperwork completed in time to get the unsecured claim filed before the deadline??

[justbroke]

Makes sense. I was also hoping that the time limit for submitting claims may be on my side if I surrender it after filing the BK13. Maybe the credit union would not be able to get it sold and all the paperwork completed in time to get the unsecured claim filed before the deadline??

Well, yes. The CU, if that's who holds the lien on your car, would have to sell the car and then submit a Claim for the deficiency. They need to do this before the Claims Bar Date. This date is set based on your 341 meeting and is 90 days after your 341 meeting.

Unsecured claims are time barred if received after that date. However, if the CU files a secured claim against the vehicle before the bar date, and amends it later, after the claims bar date... this is an interesting area. So long as it "amends" the previous claim and there is a basis, the deficiency is allowed.

However, if the Lender didn't frame the initial Claim properly, the amended claim may be time barred as it may be considered a "new" unsecured claim.

There's pretty good caselaw on this.