Need help with car, mortgage payments? Local attorney explains what to do

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Robert Ciotola explains chapters 7 and 13 bankruptcy for those late on car, mortgage payments

(WKBN) – For many, making payments on valuable assets such as a home or vehicle is difficult right now, and there are multiple reasons for that.

The cost of a car has gone up, so loans have been stretched out to eight years, in some cases, which takes a toll on depreciation.

“Most people trade in upside down. That shortfall is put onto the car you’re purchasing,” said Attorney Robert Ciotola, of Ciotola Law.

What he means by upside down is, for example, an individual trades in their vehicle but still owes money on it, the difference between the individual’s previous car and the new car is added onto the loan.

“Interest rates are high. If people don’t have the right FICO score, interest rates could be up to 22, 23, 24 percent. When you add that into a car that makes that loan a high loan,” Ciotola said.

Then, when you are trying to sell the vehicle, you may owe more than it’s worth. So, what can individuals do if they find themselves in this position? People need their car to get to work, to go to the store and take their children where they need to go.

“A person could just return his car, but the problem with that is they sell it and because of being upside down on the car, they sell the car at auction, and then they send you a bill because they didn’t get enough for the vehicle. Now, you have no car and you’ve got a substantial debt,” Ciotola said.

There’s a couple other alternatives – Chapter 7 and Chapter 13 bankruptcy.

In a Chapter 7 bankruptcy, a person can surrender their car to the loan company and because of bankruptcy, the debt is canceled. No difference is paid after the car is sold at auction, but a person is left without a car. To avoid that, a person can redeem their car.

“Which means you pay in a lump sum what the car is worth rather than what you owe,” Ciotola said.

There’s also the more successful option, which is Chapter 13 bankruptcy. It allows individuals to keep their car and rework their loan to pay back what they owe and their back payment over three to five years.

“If you’ve had the car loan for more than two-and-a-half years you can repay but only repay the value not the balance,” Ciotola said.

The benefits of a Chapter 13 bankruptcy are reduced payments according to the value of the car, individuals can make up missed payments and the interest rate is reduced.

Chapter 13 bankruptcy isn’t just for car payments, a person can use it on their mortgage.

“If there’s a foreclosure, you can stop it with a Chapter 13,” Ciotola said. “If you’re behind $5,000 on a mortgage, they’re taking the house, they want the $5,000. In Chapter 13, you can say to them ‘I’m going to give you that 5,000 but over three to five years.'”

Ciotola added that a person can stop their mortgage payment, pay back their back payments and restart their mortgage payment later on.

There are parameters for qualifying for both chapters of bankruptcy that vary based on income and where a person lives, however, an attorney can help individuals sort it all out.

“It’s unfortunate that people aren’t aware of the laws that are out there,” Ciotola said. “Chapter 13 has been around since 1977, and it’s done a lot for a lot of people…it’s there and hopefully people become aware of it and utilize it.,” Ciotola said.

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