Cars begin to depreciate as soon as they are driven off the lot, so I deal with many clients who end up owing more on an automobile than it is actually worth. However, debtors filing Chapter 13 bankruptcy can reduce that debt to a lower amount by utilizing a “cramdown.” When debtors cram down car loans, they are proposing that lenders get what the car is actually worth instead of the entire loan balance.
There are, of course, a few requirements in order to cram down a car loan. First, the car must have been purchased at least 910 days (or around 2 ½ years) before you file bankruptcy. Second, the loan must be the loan you used to buy the car.
The good news for debtors cramming down a car loan in Chapter 13 is that the interest rate on the loan will often be lowered to less than the original rate. Even better, any unpaid balance left after you pay off the value will be wiped out when you get your Chapter 13 discharged.
It should be noted that you can also cram down mortgages on real estate that is not your principle residence. Cramming down a mortgage also has enormous benefits, but mortgage cramdowns can be even more difficult to get approved than car loan cramdowns. If you are upside-down on either a car loan or a non-residential mortgage-or if both apply in your case-you should contact my firm at (866) 930-7482 today to set up a consultation to see what I can do to help you get a fresh start.
Benjamin Brand Services – Chicago bankruptcy lawyer