If you are filing chapter 13 bankruptcy, and want to keep a car with an upside-down car loan, you may be eligible to "cram down" the balance. This can allow you to hang onto a vehicle that is worth less than you owe, without having to pay the full loan amount. Read on to find out if you're eligible and how much you could save.
Can You Cram Down Your Up-Side Down Car Loan?
In order to be eligible to cram down the loan on your car, you must meet certain requirements, including:
- You owe more on the vehicle than it is worth
- You bought the vehicle at least 910 days (about 2 ½ years) before filing bankruptcy
If you meet these requirements, you can offer to pay the lender only the amount that the car is worth, because that's the amount that is "secured" by the loan. For example, if you owe $10,000 on a car that's only worth $5,000, the secured amount would be $5,000. This amount would be added to your repayment plan and paid over 3-5 years.
Advantages of Cramming Down Your Loan
There are many advantages to cramming down your loan. For starters, the amount that you owed beyond the "secured" amount now becomes "unsecured" and is treated like all other unsecured debt. In many cases, you either won't pay any of this debt or you will repay it at pennies on the dollar.
Another advantage is that your interest rate will likely go down. As a general rule, the new interest rate will be just over the prime rate. This can be a huge savings if you had a high interest rate, and the prime rate is much lower. As of this writing, the prime rate is 3.25%.
Auto Loan in Chapter 13 BK
If you aren't eligible to cram down your car loan, it is possible to get an auto loan in chapter 13 bk. Here at BankruptcyAutoFinancing.com, we have helped thousands people throughout the United States and Canada obtain the financing they need. To get started, simply fill out our online application and you could be driving a new-to-you vehicle in just a few days.
Remember we are not lawyers and cannot give legal advice. The situations discussed are only our experiences over the years and may vary with each customer.
