In these tough economic times, many people are finding it difficult to make high car loan payments. It can be very disappointing to realize that the value of your car is substantially lower than what you still owe on your car loan. We all know that our car begins to depreciate the moment we drive it off the dealership’s lot. If you have poor credit, the value of your car is not only going down, but you are likely burdened with a terrible loan. If you are in a bad car loan or are having difficulty making your payment, you can avoid repossession and reduce what you pay on the car through a chapter 13 bankruptcy.
Even though there are other options available depending on your circumstances, including loan modification, Chapter 13 bankruptcy offers a practical solution to keep your property. Chapter 13 bankruptcy has many tools than a chapter 7 bankruptcy. Many people choose to file a chapter 7 bankruptcy because it is a shorter process, however it does not have powerful tools that are available in a chapter 13 bankruptcy case.
One benefit of a Chapter 13 bankruptcy is the auto loan “cram down.” Under certain circumstances, the outstanding balance on a car loan can be reduced to its fair market value. This can be very beneficial to people who are “upside down” on their car loans and owe more than their car is worth. A “loan cram-down” also modify the terms of the loan to make payments more affordable. This process may also build and improve your relationship with your creditor, as it demonstrates your capability and willingness to meet your legal and financial responsibility.
If you have questions about auto loan cram downs and are considering bankruptcy, Lozano Law Offices are here to help. We are committed to helping you!
Since cars depreciate so quickly, it is common for a person to owe significantly more on the vehicle than it is actually worth. Chapter 13 bankruptcy offers relief to people who are in this situation. In a chapter 13 bankruptcy you will be proposing a plan to your creditors as to how you are going to deal with their debt. It also allows you to modify your car loan and pay less than the original terms of the loan.
For example, if you owe $20,000 on a car, and its fair market value is determined to be $15,000, a Chapter 13 bankruptcy will strip $5,000 off of your loan and give you three to five years to pay the remaining balance. Further, the chapter 13 bankruptcy will allow you to reduce your interest rate to about 5.00%, saving you further on your car payment.
In order to qualify for an auto loan cram down, you must have purchased the car at least 910 days (or about 2.5 years) prior to the bankruptcy filing. If you bought the car earlier than that, you won’t be able to take advantage of the cram down but you can still take advantage of the interest rate reduction which will still save you a lot of money on your car loan. The cram down is not limited to your cars, you can cram down what is paid on ATVs, RVs, boats, and most secured debts
At Lozano Law Offices, we will determine if you are eligible for an auto loan cram down. Call our office today for a free initial consultation at (510) 538-7188 or contact us online. Our office is open weekdays from 8:30 a.m. to 5:30 p.m. Saturday appointments are available for limited time only.