Here’s How To Fix Or Replace A Wrecked Car During Your Chapter 13 Bankruptcy

Here’s How To Fix Or Replace A Wrecked Car During Your Chapter 13 Bankruptcy

By |July 26th, 2012|

You wrecked your car during your Chapter 13 bankruptcy.  How can you arrange to repair or replace it without locking horns with the Chapter 13 trustee and judge?

Your lawyer should have told you that once you file for Chapter 13, you’re not allowed to get rid of any property or take out any new loans without court approval.  After a wreck you’ve got to get rid of the car and buy a new one or, at the very least, cash the insurance check to get the car fixed.

There are a few simple steps your lawyer will take to ensure that everything is handled properly and legally.

How To Fix A Wrecked Car

Surprisingly, most of the steps involved in getting your car repaired have very little to do with your Chapter 13 bankruptcy.  They are:

  1. call your insurance company to report the accident
  2. make sure you’re not injured; if so, get in touch with a reliable personal injury lawyer (don’t open the phone book or start calling people from the television; if you need a referral, let me know and I’ll put you in touch with someone who knows their stuff)
  3. if you’re injured, we’ll need to update your bankruptcy schedules to account for the cause of action for personal injuries
  4. work through the property damage claims process with your insurance company
  5. let me know when the check comes through so I can send a copy to the Chapter 13 trustee
  6. get your car fixed

How To Replace A Wrecked Car

If the insurance company declares the car a total loss, you’re going to need to get rid of it and buy a new one.  While you’re in Chapter 13, that means jumping through a few legal hoops.  Though it will take some time, I can help make the process smoother for you.

In addition to the first 4 steps above, here’s what we’ll need to do:

  1. find the new car you want to buy
  2. file a motion to substitute collateral, which is a fancy way of saying, “ask the court for permission to use the insurance proceeds to swap out a new car for the wrecked one)
  3. file a motion to “sell” your wrecked car to the insurance company so they will pay you the money
  4. if you’re buying a new car that’s more money than the wrecked one, we’ll need to file a motion to allow you to take on some new debt as well

Move Quickly To Avoid Hassles In Your Chapter 13

Especially if you’re looking to get rid of a wrecked car and replace it during your Chapter 13 bankruptcy, this is going to take some time to get resolved.  The Chapter 13 trustee, the judge and your lawyer are all going to have a hand in making the process go smoothly.

Remember, this is far more complicated than replacing your car after Chapter 7 bankruptcy.

Fixing the car is largely in your hands, but to replace it you’ve got a significant amount of court time.  Motions need to be drafted and filed, then everyone involved in your case gets time to review those papers before the hearing.  Making it all happen is going to take a minimum of about 30 days, so it’s best to move quickly.

Before signing any agreement to purchase a new car, you’ve got to get in touch with me and get it approved by the court.  A failure to do so will put your Chapter 13 in jeopardy, which makes your life even tougher than it already is.


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About the Author:

I've been a consumer protection lawyer since 1995, working to help people end their bill problems. I'm a faculty member at the Student Loan Law Workshop, a nationally recognized speaker, and a long-time member of both the National Association of Consumer Bankruptcy Attorneys and National Association of Consumer Advocates.