The filing of bankruptcy can lower your car payment and possibly reduce the amount you pay for your vehicle when filing a Chapter 7 or Chapter 13 case. First, you must have purchased your vehicle or taken out the loan at least 910 days before the bankruptcy case is filed. The next issue is how much is your car worth compared to how much you still owe on the vehicle loan. Please give us call toll free at 1-877-963-9543 to schedule a free consultation and find out if bankruptcy can help. All of our consultations are with attorneys only, not paralegals or legal assistants.
- Chapter 13 Bankruptcy
- Get Rid of Underwater Second Mortgages and Equity Lines of Credit
- Stop Foreclosure of Your Home
- Discharge or Payoff Taxes Without Interest or Penalties
- Pay Unsecured Debts With No Interest
In a Chapter 13 bankruptcy case a vehicle payment can be lowered and percentage rate of the loan reduced as part of the Chapter 13 plan of reorganization. If your car is worth less than what you owe and your percentage rate is high, then filing a Chapter 13 case could significantly reduce your monthly vehicle loan payment. Most Chapter 13 plans are between 36 and 60 months. See below for an example of how your monthly vehicle payment can be made affordable and allow you to keep your car or truck.
For Example:
– Purchased 2010 Chevrolet Silverado 2500 HD Crew Cab $43,500 APR 7.5%
– Your current monthly payment is approximately $872 per month for 60 months
– It is now 2013 and Kelley Blue Book says the truck is only worth $26,500, but
you still owe approximately $31,392 on the original loan
– File Chapter 13 and pay the $26,500 the truck is now worth at 4.25% and the truck payment is now only $491 for 60 months of the Chapter 13 Plan
– Please note that these are approximations, but it is an example of how a vehicle payment can be reduced in a Chapter 13 plan of reorganization
In a Chapter 7 bankruptcy case you can also pay less than what you owe on the existing vehicle loan. Again, your vehicle will need to be worth less than what you still owe on the original vehicle loan. In Chapter 7 a car or truck can be redeemed for the fair market value under section 722 of the bankruptcy code. It is called a “722 Redemption.” A motion must be filed with the court and the redemption approved. The catch with redemption is that whatever the value of the vehicle is worth must be paid in a lump sum to satisfy the old loan. What commonly happens is that a new loan is issued from a third party to pay off the first loan. The new loan will reduce the monthly payment and in theory allow you to pay less for your vehicle.
