If you car is worth less than what you owe, you are paying excessive interest and that is equal to your loan servicer ‘stealing’ from you. You can cut interest rates, reduce loan balance and significantly reduce your total loan amount by cramming down your auto loan in Chapter 13 bankruptcy. A cramdown puts Chapter 13 at an advantage than Chapter 7.
With chapter 13 bankruptcy, you can propose to the court a plan where you make your monthly debt payments over a period of up to five years. A bankruptcy attorney should be very helpful in helping you come up with the amount basing on the amount you owe, your budget and income. This means that when you finish your payments, the remainder will be discharged and you will not be responsible for any debts.
Chapter 13 also makes it possible for your bankruptcy attorney to petition a “cramdown” on your car since the value of a car depreciates with time. You can argue to repay only the value of the car rather repaying remainder of the total loan you took. Chapter 13 allows for you to cramdown the loan balance as well as the interest rate. This significantly reduces the debt on the car.
You may not be able to save your car in some cases where the 910-Day rule does not apply. Eligibility for a cramdown on the balance of your car loan is only valid if you bought the car at least 910 days from the date you filed Chapter 13 bankruptcy. The same rule applies for cramming down interest rates. Some lenders can accept to reduce rates on cars that were bought slightly close to 910 days but there is no guarantee that they will. Cramming down can be done on interest separately from the auto loan balance.
You can save a substantial amount of money if you choose to cram down both interest and loan balance and at the same time stretch your payments over a period of three to five years. Chapter 13 saves not only your car but your money too. Contact a bankruptcy attorney today if you are facing challenges with your auto loan repayments due to bankruptcy.