If you have an open Chapter 13 bankruptcy, you may be paying a portion of your car note each month to satisfy the bankruptcy arrangement. It doesn't make sense to keep paying your car bill if your vehicle is totaled in an accident. However, unless you successfully modify the bankruptcy plan or use your insurance check to pay off your entire balance, that's exactly what you'll end up doing.
Consult Your Attorney
Contact your attorney as soon as possible after an accident, especially if you expect your car to be totaled. Your attorney can advise you as to all your options, their pros and cons and the likelihood of any particular action succeeding. Thus, his help will allow you to make an informed decision about what to do. In addition, if you want to attempt to modify your claim or take other legal action related to your bankruptcy, your attorney needs to file a motion right away to avoid missing any deadlines.
Decide Whether To Fix Your Vehicle
Whenever a vehicle is totaled in an accident, you must decide whether to pay out of pocket to fix it or let it go and purchase something new. If the accident happens while you are in Chapter 13, you must consider the effects of each choice on your bankruptcy as well. You still must pay your bankruptcy trustee even if your vehicle is totaled, so you may not be able to afford to fix the vehicle. However, if you want something new, you will have to get your trustee's permission to finance another vehicle and may find it difficult to find a lender willing to give you a loan.
Contact Your Bank
If your vehicle is totaled, your bank may allow you to surrender it if you give the bank your insurance check or may allow you to get a new vehicle with the insurance check if you agree to allow the bank to place a replacement lien on the new vehicle. Your attorney can contact the bank on your behalf if you wish. If the bank is willing to deal with you rather than just demand its money, it can save you time in court trying to modify the arrangement or time spent getting permission from your trustee to finance another vehicle.
Contact Your Trustee
If you decide to purchase a new vehicle, you must meet with your trustee to get permission to finance the vehicle. Draw up a budget before meeting with your trustee. Your budget must include the other bills you owe to the bankruptcy estate each month as well as your new car note. If your trustee approves your plan, he gives you a letter of permission to take to car dealers when you purchase your new vehicle.