Are you behind on your car payment? Is your car payment larger than your budget allows? Do you fear that your car may soon be repossessed?
If you answered yes to any of these questions, Chapter 13 bankruptcy assist you in reducing your car payment to a manageable level that you can pay every month.
How Could Chapter 13 Bankruptcy Help Reduce Your Car Payment?
In Chapter 13 bankruptcy, your debts are adjusted under a court-approved repayment plan. Under this repayment plan, monthly payments of secured and unsecured debts are restructured. Typically, secured debts, those backed by collateral, must be paid or kept current throughout the duration of your payment plan (3 to 5 years). Your “general unsecured debts” are lumped together and paid with disposable income that remains after you pay your living expenses.
You might also be able to reduce the amount of your secured debt by only paying the value of the collateral as opposed to the whole debt.
Suppose you owe $16,000 for your vehicle. Further suppose that your vehicle is only worth $10,000. In chapter 13, if your car debt is over 2 ½ years old, you may be able to “cram down” the value and pay only $10,000. The remaining portion of the debt, which is $6,000, is treated as unsecured.
In chapter 13, your vehicle loan could be adjusted so your monthly payment is calculated only on the secured part of the loan. This could significantly reduce the amount of your monthly loan payment.
The monthly payment could get reduced further as your payments are stretched out over the length of your bankruptcy repayment plan (3 to 5 years). Also, the bankruptcy court sometimes requires the reduction of a loan’s interest rate if it is higher than normal. This further reduces the loan payment.
How to Qualify for Chapter 13 Bankruptcy Vehicle Cram down
The timing of the car loan is the key to determining whether you pay the value of vehicle or the loan payoff. Specifically, you can only cram down the secured value if your vehicle loan is over 910 days old (about 2 1/2 years) at the time you file your Chapter 13 bankruptcy petition. Furthermore, you are now bound by the 910 day rule if the loan was not for the purchase of your vehicle or was refinanced. If you refinanced the vehicle or borrowed money for another reason using your car as collateral, you could still cram down the value.
Getting Help with a Chapter 13 Bankruptcy Vehicle Cramdown
Bankruptcy laws are complex and affect each debtor depending on their financial situation. This is especially true when concerning a Chapter 13 bankruptcy vehicle cram down. You do not have to figure this out on your own.
Our bankruptcy attorneys have over 20 years of experience helping clients reduce their car payments through Chapter 13 bankruptcy. Contact us to set up a free evaluation to see if Chapter 13 bankruptcy could be the answer to helping you keep possession of your car.