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Bankruptcy Law

What Happens if I’m in a Car Accident While I’m in Chapter 13 Bankruptcy?

Bankruptcy Law Being in a car accident is bad enough as it is, but can be even more problematic is you are in Chapter 13 Bankruptcy when it happens.   The most important thing to do is let your attorney know.   The steps that will be required depend on the circumstances.  We have outlined two below:

•    Repairable damage, full insurance coverage - This is the best-case scenario and will have little to no effect on your Chapter 13 Bankruptcy.
•    Totalled car, full insurance coverage - You could use the insurance proceeds to purchase another car. In this case, your attorney may file a motion to substitute collateral (so you can use this money to purchase a "new" vehicle instead of paying the total to the lienholder) and a motion to "sell" your totaled car to the insurance company (so they pay you the money).  It gets even more complicated if the car you want to purchase is worth more than your totaled car and the difference needs to be financed.  

As you can see, there is a lot involved in the process, so it is extremely important to contact your attorney as soon as possible to let them know about the situation.  Make sure not to sign any paperwork on a new car until you speak to your attorney.  If you do, you may not remain in compliance with the terms of your Chapter 13 bankruptcy plan and the obligations you have while on it.

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