- When you file a Chapter 13 case, you propose a plan to repay some or all of your debt. Your creditors must file claims to receive payment. Your Chapter 13 trustee, who collects your money and disburses the funds, pays the money according to the proof of claim, which is the document a creditor files with the court. If you're paying for a car through your Chapter 13 plan, your car lender has a claim on file showing the balance due at the time you filed your case.
- If you total your car during your bankruptcy case and your insurance company pays the car lender in full, the trustee shouldn't pay the claim the car lender has on file. The car lender and the insurance company should notify the trustee, but you should also notify your attorney to make sure the trustee stops paying the car lender. The trustee will remove the claim from her payment schedule.
- Your plan payments will remain the same in your Chapter 13 case until someone acts to change them. If your car lender notifies the court and the trustee that its claim is satisfied, the trustee will stop paying the claim, but she will continue to collect the same amount and use the amount she was paying to your car lender to pay your other creditors.
- You can lower your plan payment after your car lender's claim is gone, but only if you can show that you need that money for something else. For example, if you finance a new vehicle, you can amend your expense schedules to show the new car payment and modify your plan to reduce your plan payment so you have the money to pay for your new car. Because a new car loan is postbankruptcy debt, you must pay it outside of the plan. You must also get the trustee's permission to borrow the money. If you don't buy a new car, you can't lower your plan payment without other cause. Paying extra to your other creditors, though, could end your plan early.
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