If you are experiencing a financial emergency where you have to file for Chapter 13 bankruptcy, you may be wondering if you are eligible for a title loan. Simply put, the answer is no, you cannot.
While Montana Capital Car Title Loans cannot accept an applicant in active bankruptcy, we can assist borrowers who have finished a previous bankruptcy process. That means if your bankruptcy is currently closed or has been dismissed or discharged, a car title loan is within your reach!
Does Chapter 13 Affect Title Loans?
Yes, declaring Chapter 13 Bankruptcy does affect how you can get a title loan for your vehicle. Here are the different ways:
Applying for a Title Loan During Chapter 13 Bankruptcy
You will need to receive special approval if applying for a title loan during a Chapter 13 bankruptcy. This is because chapter 13 bankruptcy trustees must approve new debts while in the bankruptcy process, which sometimes excludes title loans.
Even after bankruptcy, borrowers may still have trouble qualifying for certain types of financing, like personal loans. However, it isn’t impossible to get a loan after bankruptcy!
If You Already Have a Title Loan During Chapter 13 Bankruptcy
If you already have a title loan, a bankruptcy may impact it.
While a Chapter 13 bankruptcy may allow you to keep your car and title loan if you can’t make ends meet, it depends on the outcome. In bankruptcy, your attorney may restructure your debts to reduce your debt and make your bills more affordable.
What Is Chapter 13 Bankruptcy?
A Chapter 13 bankruptcy is debt reorganization to help consumers repay their debts in a way they can afford. Debtors make payments to a bankruptcy trustee based on their current income, typically for three to five years.
With Chapter 13 bankruptcy, you don’t lose your property. This allows you to keep the loan collateral and create more affordable terms to repay your debts.
Good to Know:
If you are actively in Chapter 13 bankruptcy and want to apply for a car title loan, you must get permission from your bankruptcy trustee first. Because the intention of a Chapter 13 bankruptcy is to eliminate your current debts, your trustee is responsible for evaluating if a title loan is right for you and, if it is, what terms are right for your situation.
The majority of lenders will not approve a loan for a consumer who is in Chapter 13 bankruptcy. Having the ability to repay your loan is an essential factor, and this is probably not possible in this case.
Example of Chapter 13 Bankruptcy Limitations on Title Loans
For example, If you are thinking about taking out a car title loan for $1,000 and have one month to repay it at a fee of 25%, you will be paying back a total of $1,250. Sounds simple, right?
It may not be. In a Chapter 13 bankruptcy, you are limited by your repayment plan. Your trustee will decide if this is an expense that you can realistically pay back within your current plan. In this example, If the $250 is more than you can afford or if the trustee doesn’t deem the loan to be in your best interest, you may be denied.
Chapter 13 Bankruptcy and Title Loans
During a Chapter 13 bankruptcy, your debts are not eliminated. Instead, they are restructured and must be paid back. These debts include secured debts like mortgages, car loans, and even car title loans that are backed by collateral. In addition, certain unsecured loans (not backed by collateral) may be forgiven, while the rest are included in your debt reorganization for repayment.
Need to File for Chapter 13 Bankruptcy With a Title Loan?
So while you can’t take out a title loan on your car during Chapter 13 bankruptcy, you may find yourself in a situation where you already have a title loan but need to file for Chapter 13 bankruptcy. What then?
- Decrease the interest rate to the going rate.
- A repossessed vehicle may be returned.
- Decrease the principal loan balance to the car’s true value.
- Reduce your monthly payments to make them more affordable.
- Your bankruptcy attorney will help you work out a repayment plan.
How Do You Get a Title Loan After Bankruptcy?
After your bankruptcy is discharged, you may apply for a title loan. Your trustee no longer has a say in what debts you take on. So if you prove you can afford the loan, you may be eligible. After all, your ability to repay your title loan is one of the most important criteria in the approval process.
Follow these three quick and easy steps to apply for a title loan with Montana Capital Car Title Loans:
Click or Call
Fill out the online application or reach out to a Montana Capital loan agent at 1-888-700-8900 to apply by phone. We offer extended hours 6 days a week!
Submit Your Documents
You can submit your documents online or by contacting one of our loan agents. Your vehicle’s make, model, and mileage, as well as proof of income, will be required.
Get Your Money!
Receive your funds! You can get your money online, deposited into your bank account, or pick it up at a participating location like your local MoneyGram.
Chapter 7 Bankruptcy With Title Loans
Chapter 7 bankruptcy works differently than a Chapter 13 bankruptcy. Instead of restructuring your debts, a Chapter 7 bankruptcy discharges or releases borrowers from their unsecured debts. In most states, you can keep exempt property, and secured loans may stay in effect.
Since a title loan is a secured loan, Chapter 7 bankruptcy gives you the option to either reaffirm or redeem the debt. In other words, continue making your title loan payments or work out a single payment that is equivalent to your car’s current value, not what you owe.
If you cannot repay the debt, you must surrender your vehicle since the title loan lender has your title.
Differences Between Chapter 7 and Chapter 13 Bankruptcy
Chapter 7 Bankruptcy
Chapter 7 bankruptcy is a request to wipe out or discharge unsecured loans. To file Chapter 7, you must take and pass a Means test, which ensures that your only option is the discharge of your debts and not a repayment plan. It also allows you to liquidate assets (sell them) to pay your debts. Any proceeds earned from liquidation go directly to the creditors.
However, a car title loan is a type of secured debt and isn’t likely to be discharged in a Chapter 7 bankruptcy. If you have a car title loan, you can pay back the loan according to your terms, speak with your lender to adjust your terms, or in the event that you default on the loan, the lender can repossess and sell your vehicle.
Chapter 13 Bankruptcy
Chapter 13 bankruptcy isn’t a liquidation. Instead, you restructure your debts to make them more affordable. The repayment plan can last from three to five years and doesn’t require the Means test required by Chapter 7 bankruptcy.
If you have an existing title loan and apply for Chapter 13 bankruptcy, your repayment plan will allow you to make one payment each month. This lump sum payment can help decrease what you would normally pay back each month and may decrease your title loan’s interest rate. As mentioned above, if your vehicle was recently repossessed, a Chapter 13 bankruptcy may be able to have it returned to you.
Reach Out to a Bankruptcy Attorney
If you decide to file for bankruptcy, an attorney can be a great asset. However, it is imperative that you are open and honest with them about your assets and liabilities, including title loan debt. Your attorney will be able to tell you how to proceed, but not being transparent with them can create additional hurdles.
In many cases when filing bankruptcy, you can keep the car if you continue making payments on the loan. Ultimately, though, the final say is up to the bankruptcy court.
Talking to an experienced bankruptcy attorney about which option is best for you is important. If you file Chapter 13, you’ll need your trustee’s approval before taking on another loan if you’re still in default.
After discharge, however, taking out a title loan is possible. Your bankruptcy history may affect your chances of securing a title loan even if you can prove you can afford the loan and provide the required documents. Still, if you are no longer in default and are in need of cash quickly, Montana Capital Car Title Loans may be able to approve you with the following:
- Proof of identity with a government-issued ID
- Proof of residency
- Proof of adequate income (doesn’t have to be employment income)
- Supply the title with your name on it
- Provide photos of your vehicle’s interior and exterior to determine its value
Can You File Bankruptcy on a Title Loan?
Yes, you can file for bankruptcy with a car title loan. However, the type of bankruptcy determines how your title loan is handled. For example, when filing for Chapter 13 bankruptcy, you may be able to restructure the debt to make it more affordable.
Are Title Loans Included in Bankruptcy?
Title loans aren’t automatically included in bankruptcy. It depends on the type of bankruptcy you are filing and your situation. While neither Chapter 7 or Chapter 13 bankruptcies will eliminate your title loan debt, they can make repayment easier.
Chapter 7 bankruptcy eliminates debt from unsecured loans. While that does not include title loans, it can potentially free up additional funds to stay current on your title loan payments. Chapter 13 bankruptcies can help create more favorable repayment terms.
What Happens to My Title Loan if I File for Bankruptcy?
If you file for bankruptcy and have a title loan, you’ll either continue making payments, have the loan restructured, or surrender the car and stop making payments. If you are considering bankruptcy, we recommend consulting with a bankruptcy attorney. They can help you determine the right option for your situation.
How Can I Keep My Car Without Filing for Bankruptcy?
To keep your car without filing for bankruptcy, you must make your monthly payments. Missing payments give the title loan lender the right to repossess the vehicle to repay the loan. Talk to your lender if you are having trouble making your loan payments, and ask for a more convenient/manageable repayment schedule.
Can I Get a Title Loan While in Chapter 13: The Bottom Line
Unless your trustee gives permission to apply, title loans are usually not available to Chapter 13 bankruptcy filers. However, it’s not always as bad as you think! Montana Capital Car Title Loans may approve you for financing after your bankruptcy process is complete.
If you are thinking about filing for bankruptcy, you should always consult with an experienced bankruptcy attorney first. By examining your options, they can help you decide what’s right for you. The key is to be honest with your bankruptcy lawyer about the loan so you can figure out the best course to take.
If you are no longer in bankruptcy and need financing, Montana Capital Car Title Loans may be able to help – apply here to see if you qualify!