Can filing bankruptcy lower my car note?


A chapter 13 bankruptcy can possibly lower the monthly payments you are making on secured debts such as your car, motorcycle, furniture notes, etc. There are two possible ways for these notes to be lowered.

The first is simply by stretching out the amount you owe by the length of the chapter 13 plan which can be up to 60 months. For example, say you owe $10,000 on your car and your monthly payment is currently $535.00. If you pay through the chapter 13 plan, your payments would lower to approx $166.67.

The second way that your notes could possibly be lower depends upon how long you have had the secured debt. For items such as furniture, appliances, etc – if you purchased more than 1 yr prior to filing chapter 13 you can “cram down” and pay off the items based on their current value. Vehicles must be purchased more than 2.5 yrs prior to filing a chapter 13 to be “crammed down” to value. So for example – using the same car in example above that you owe $10,000 on, let’s say the value of the vehicle is only $7,000 and you have had it for more than 2.5 yrs. You would pay this debt off based on it’s value of $7,000 through the chapter 13 plan of 60 months – making the monthly note around $116.67.
Vehicles that are in the name of the person filing chapter 13 but are driven by another family member or used solely for business can be “crammed down” regardless of when they were purchased.

Of course there is much more a chapter 13 plan can do for you so take advantage of our free consultation and give us a call today. Chapter 13 bankruptcy was designed to protect your property and allow you to regain control of your financial situation.

Disclaimer: This blog is intended as general information purposes only, and is not a substitute for legal advice. Anyone with a legal problem should consult a lawyer immediately.

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