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The Cramdown: Lowering Your Car Payment in Bankruptcy

On Behalf of | Jun 29, 2017 | Chapter 13 Bankruptcy

Property is often one of the main concerns in bankruptcy. The potential loss of your home or car may become a central focus, as well as the deciding factor in whether you file for Chapter 7 or Chapter 13 bankruptcy. While Chapter 7 is generally considered the liquidation bankruptcy, you can still usually keep your car and home as exempt items and continue to pay on them. In Chapter 13, there is generally no question about keeping your property as it is reorganized into a larger repayment plan overall with debts paid off in three to five years. You may also be able to negotiate better payouts overall, with the cramdown serving as a perfect example.

Do you have a car payment that is currently consuming a considerable part of your income even though it has depreciated in value? While you are concerned about seeing the bulk of your non-secured debt discharged in bankruptcy, worries over a substantial car payment still lingering after bankruptcy may be weighing heavily on you. If so, speak with your bankruptcy attorney about a possible cramdown for your current car loan in Chapter 13. You may find that you can save yourself many thousands of dollars!

A cramdown is possible for numerous different types of properties, from homes to cars to boats, and more; however, the auto cramdown tends to be most common to bankruptcy, allowing for the note to be modified by the bankruptcy court. If you own a car (and have owned it for at least 910 days before filing for bankruptcy) and say, still owe $20,000 on it but it is now only worth $5,000, your attorney may very likely be able to file the appropriate motions to see that the car loan is crammed down to its immediate value and paid off within your Chapter 13 bankruptcy.

The goal is to see you exiting bankruptcy with as many debts discharged as possible, and a new lease on life financially. Leaving bankruptcy still tied down to a substantial car loan with a depreciated vehicle may set you up for failure later. With your attorney’s help, you should be able to tie up all loose ends such as these and find your way to financial freedom.

The experienced attorneys at Levitt & Slafkes, P.C. can answer all your questions regarding bankruptcy issues. 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.