Do you have a car payment that you can’t afford on a car that has depreciated in value? While you may be concerned about getting rid of your unsecured debts such as credit cards in bankruptcy, you are still worried about a car payment that you cannot afford.
If so, you should ask your bankruptcy attorney if you could lower your car payment with a cramdown of your current car loan in a Chapter 13 bankruptcy.
What is a Cramdown?
A cramdown of a car loan in a Chapter 13 bankruptcy lets you reduce the principal balance of your car loan to the value of the car that is securing the loan. In certain situations, a cramdown of a car loan can lower your monthly payments significantly.
Can I Cramdown My Car Loan?
In order to cramdown your car loan, you must have bought your car more than 910 days before filing your Chapter 13 bankruptcy. This rule stops people from buying a car and immediately filing a bankruptcy to cram down their loan.
Your car must also be worth less than your car loan.
Example of a Cramdown
A cramdown can be confusing to understand so here’s an example:
If your car is worth $10,000 but the loan balance is $20,000 you can cramdown your loan to $10,000, the car’s value in your Chapter 13. In the Chapter 13, the remaining $10,000 of the loan balance will be treated like your other unsecured debts such as credit cards and medical bills. Your monthly car payments will be lower and the remaining balance will probably be paid just pennies on the dollar and will be discharged (eliminated) at the end of your Chapter 13 plan. You will own the car free and clear at the end of the bankruptcy.
Contact Levitt & Slafkes to Discuss Lowering Your Car Payments
The lawyers at Levitt & Slafkes, P.C. have successfully crammed down many car loans in bankruptcy. Contact us today so one of our attorneys can evaluate your case and discuss the best options available to you. We are here to help!
Call us at (973) 323-2953, or contact us online to schedule a free consultation.
We are proudly designated as a debt relief agency by an Act of Congress. We have proudly assisted consumers in filing for Bankruptcy Relief for over 30 years. The information on this website and blogs is for general information purposes only. Nothing should be taken as legal advice for any individual case or situation.