ABA Family Legal Guide

Consumer Bankruptcy

Chapter 13: Wager-Earner or Individuals with Regular Income Bankruptcy

Chapter 13 in Action

What happens to my secured collateral during a Chapter 13 bankruptcy?

Debtors are prohibited from the stripping down security interests in motor vehicles acquired within 910 days of the petition filing, and of other secured debts incurred within one year of the bankruptcy. "Stripping down" refers to the process, allowed under the older version of the bankruptcy laws, whereby debtors could propose a new value for property that they owned money on. Today, you must repay the full amount of the loans on such property.