“You should get your car title after you receive a discharge at the end of your chapter 13 case,.” says Illinois Bankruptcy Attorney Andy Miofsky. Most bankruptcy courts require the chapter 13 trustee to serve as the paying agent for car loans. There are a few exceptions, but generally you pay a monthly amount to the trustee and the trustee uses that money to pay your car claim.
Rarely does a chapter 13 Plan provide that you pay the car loan according to the original contract terms. Under such a plan, you should receive your title from the lender as soon as the trustee pays off the loan.
Typical chapter 13 plans involve paying a lessor amount on the loan balance or a lower interest rate or a lower monthly payment spread over the course of the bankruptcy case. In these cases, the car lender will receive less money through the bankruptcy than was owed on the original contract. Because you are not paying the lender the full amount owed, the lender can keep your title until you receive a discharge. A discharge will occur after you complete the terms of your chapter 13 plan. If you do not complete the plan, then the debt will not be discharged and the lender can keep your title until you pay off the remaining loan balance.
Neither the Court, nor the trustee, nor your bankruptcy attorney have your title. The lender retains possession of the title during your case. Once you receive a discharge you should contact the lender and demand return of your title.
Andy Miofsky, Esq.
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Last modified: January 12, 2012