If you have title loan & file Chapter 7 can the interest charged on what you owe be discharged?
5 attorney answers
If your car lender holds a properly perfected lien on the title of your car, then they hold a claim that includes all interest and fees allowed by the note you signed. There are different ways to keep a car in a Chapter 7. One way is to redeem, where you pay the lender in full what your car is worth regardless of what you owe. Then, the difference is discharged in bankruptcy and you do not have to pay it. This usually requires a new loan right after filing but before your bankruptcy is over, which under the circumstances is usually at 24% interest. Sometimes it is better to pay 24% on $5,000 than 0% on 10,000. Another way to keep a secured car in a 7 is by a reaffirmation agreement, which theoretically could waive some of the amount that is owed, which includes interest. It is fairly rare for a creditor to agree to this, as they usually want the debtor to agree to the original terms. A Chapter 13 would allow you to keep the car by paying what it is worth over a 3-5 year period. You should consider either redemption in a 7 or a 13.
If you're behind on your payments, once you file a Chapter 7, the title loan company will most likely file a motion to lift the automatic stay so that they can repossess and auction off your vehicle. I recommend retaining a bankruptcy attorney to discuss your options.
I hope this helps!
The information provided in this post is not "legal advice." Rather it is general information on common legal issues. If you have questions concerning your specific situation, it is always best to consult an attorney in your area.
With a secured debt, you either forfeit the security and discharge the debt, you redeem the property for fair market value, or you reaffirm the debt and pay according to the terms of the reaffirmation agreement.
Hope this perspective helps.
You may be able to negotiate the terms of this secured loan through a reaffirmation agreement after filing a chapter 7 bankruptcy case, particularly if the contract interest rate is higher than the market rate. I would encourage you to speak with a local bankruptcy attorney to further discuss and to explore all of your other options.
If you can file a chapter 7 successfully, (meaning you meet the guidelines to do so) you would be able to discharge most types of unsecured debt, including payday loans. There are certain limitations to discharge, but interest isn't one of them. Meaning if the debt is dischargeable, then so is the interest accrued on it.
I encourage you to seek out a local attorney who does Bankruptcy regularly, and they can help you decide if it would be right for you.
P.S. Also, many of my clients have been misled about the affects of bankruptcy by listening to the payday lenders. Do not rely on your lenders to provide you with legal advice. Payday lenders could provide inaccurate or even purposefully misleading advice, because they want you to pay.