Your vehicle starts to depreciate the second you drive it off of the lot. This means that your car is typically worth a lot less than what you owe on the loan. A Chapter 13 bankruptcy allows for a cram down of this debt to the market value of the vehicle. For example, if your car is worth $5,000.00 and you owe $10,000.00, you may cram the loan down to $5,000.00. The remaining balance will be treated as unsecured and can potentially be discharged (i.e. forgiven at the conclusion of your Chapter 13 bankruptcy) for pennies on the dollar. Your lender will be required to accept this proposal once the Judge confirms your Chapter 13 Plan.
The following requirement must be met to qualify for a cram down: You must have purchased the vehicle at least 910 days (roughly 2 ½ years) before filing for Chapter 13 bankruptcy. The reason for this restriction is to disallow people from purchasing new vehicles and then filing Chapter 13 bankruptcy to cram down their loans. However, you could really benefit from a cram down if you meet this requirement.
You should contact an experienced bankruptcy attorney at JRQ & Associates to discuss your situation and determine if you qualify for this option. Even if you do not qualify for this option, we may be able to slash your interest rate considerably and lower your car payment. Call today to schedule your free bankruptcy consultation with one of our experienced bankruptcy lawyers.