Q: Can my auto loan be placed as a charge off while in Chapter 13 by the creditors?

A: A "charge-off" of a loan by the financial institution is often misconstrued. It in no way affects the borrower's legal obligation to repay the debt; it is only an in-house accounting entry and loan classification that affects the bank's capital/lending limits and is usually done for regulatory reasons, i.e., semi-mandatory.

There is always some delay between debtors' payments to a bankruptcy trustee and the trustee's payout, and priority of payment, to creditors. The bankruptcy trustees maintain records of receipts and disbursements online and you can access those to discover what has been received, paid out to particular creditors, or retained. It is common for some amount to be undistributed by a trustee if case is dismissed, and often, that amount is refunded to the debtor.

"Threatening repossession"- lenders almost always want your money, not the collateral. Be persistent about dangling money cures to your lender and reaching some agreement, preferably in writing, about a mutually acceptable cure in your circumstances.

A: An important issue in chapter 13 cases is whether to pay the vehicle loan directly outside the plan as a long-term debt, or in the plan by the trustee as a secured claim. The downside of putting it in the plan is an early dismissal produces an immediate default. Unless you are cramming down the loan, the better course is usually to pay a vehicle loan directly outside the plan.

A default on a vehicle loan can be the reason for filing chapter 13 in the first place, although it may not make economic sense in the long run. Often, a debtor can file another chapter 13 case after the dismissal of a prior case, provided it was not a voluntary dismissal by the debtor following the filing of a motion for relief from stay.

Anyone who desires to keep a vehicle in default should consult with an experienced Virginia bankruptcy lawyer.