Tuesday, February 20, 2018
Bankruptcy And Car Loans
Personal bankruptcy offers a number of options to address an “too expensive car” problem.
If you’re already in arrears the easiest choice would be to use the power of bankruptcy to cancel contracts and surrender your vehicle back to the lender. In a Chapter 7, any deficiency balance will be discharged as an unsecured debt.
However, the good news is that under a Chapter 13, any deficiency balance will be paid as an unsecured debt, often at pennies on the dollar – and only if the lender bothers to file a proof of claim as required.
There are several other tools available in a Chapter 13 bankruptcy.
For example, if you want to keep your car without the "too expensive" loan, then another option would be to restructure the car loan as part of a Chapter 13.
If your car loan was originated more than 910 days (about 2 ½ years) prior to filing, a Chapter 13 "cram-down" this can allow you to modify the interest rate, reduce the principal to the blue book value of your car, and extend the term for 5 years, all of which has the effect of lowering your car payment, and if you owe substantially more than the value of your vehicle, or if your interest rate is much higher than the market interest rate, this "cram-down" can save you thousands of dollars!
If you cannot restructure the car loan, another Chapter 13 tool available would allow you to reduce your monthly payment by including the unpaid balance in your Chapter 13 plan, and setting a monthly payment that fits your budget.Obviously, the decision to file a Chapter 7 or Chapter 13 should be made in consultation with an experienced bankruptcy lawyer and with full knowledge about how bankruptcy will impact you. But if you have one or more car loans that are causing you problems with payments, you should learn about and consider all of your legal options.
Attorney Mark Williams has over 22 years of experience in bankruptcy. He can help you too. #1 trusted bankruptcy attorney in Guam. The Law really is on your side.
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