Mark Williams is Guam's Best Lawyer. The Law Offices of Mark E. Williams, P.C., dba Dededo Law Office, is a full-service law firm committed to protecting the legal rights of our clients. Our firm has a broad-based practice with an emphasis on family law, bankruptcy, immigration, injuries, and insurance claims, probate, wills and trusts, corporate and business organization, and criminal defense.
Saturday, July 15, 2017
REDUCING CAR PAYMENTS IN BANKRUPTCY
Car loans are
our most expensive purchases next to a home loan. According to an article
in USA Today, the average cost of a new car or truck is $33,500. Due
to lenders now extending car loans to 72 months or longer, when you factor in
interest rates, you can easily find yourself responsible for $40,000, $50,000
popular belief, cars are not an investment asset the reason is because vehicles
do not appreciate, they always depreciate. In many cases if you finance a
vehicle over 60 months, you may actually owe more on your auto loan than the
vehicle is worth.
vehicle is underwater (owe more than the value of an asset) the loan can't be
eliminated by simply selling the vehicle.
example of this type of situation that could cause a calamity would be in the
event of a car accident, where a car is "underwater", not only do
insurance premiums rise due to an accident claim, but typically insurance benefits
are based on the replacement cost, or blue-book value, and not the higher
loan balance, so that a car loan which is "underwater" results in you
having a balance to pay for a car (which you no longer own after the car has
been destroyed in an accident)!
changes in income due to a job loss or change in the family, illnesses,
"underwater" insurance payouts after an accident, or any number of
other factors could turn that car loan into a major financial headache.
Bankruptcy and Car Loans
bankruptcy offers a number of options to address this “underwater car loan”
choice would be to use the power of bankruptcy to cancel contracts and surrender
the vehicle back to the lender. This is only possible in bankruptcy,
because any remaining loan balance would be subject to elimination, or
discharge. Outside of Bankruptcy, you would still owe the
"underwater" portion of the car loan balance.
option would be to use Chapter 13 of the Bankruptcy Code to restructure a car
loan for a vehicle you wish to keep.
can often allow you to lower your car loan expense by reducing the principal
and lowering the interest rate, and extending the loan term up to an additional
on the balance of your car loan, this strategy can save you thousands of
the decision to file bankruptcy should be made in consultation with an
experienced bankruptcy lawyer. However, if you are having problems with
car payments, you should certainly learn about and consider all of your