Chapter 13 bankruptcy is a very useful tool for individuals with income who have a house payment or a car payment and are behind or need relief from excessive debt. If you’re behind on your house payment, for example, Chapter 13 can help you catch up on your mortgage and stop foreclosure. If you own a car, Chapter 13 can stop repossession and may even help you reduce the total balance due on your car loan. A bankruptcy attorney Dallas TX can review your car loan and determine whether you qualify for what’s called a cramdown – reducing your car loan to the value of your car.
Bankruptcy Attorney Dallas TX: Qualifying for a Chapter 13 Car Cramdown
Motor vehicles depreciate in value very quickly. If you finance the purchase of a car, your car is in most cases worth less than you paid for it as soon as you drive it off the lot. Because of this, your car is likely not worth what you owe on it. In cases like this, as long as you meet certain criteria, you may be able to do a Chapter 13 cramdown. The term comes from the effect it has on your loan: the balance of the loan gets “crammed down” to the value of the vehicle. For example, if your car is worth $10,000 but you owe $15,000 on it, if you cram it down in Chapter 13, you only have to pay $10,000 plus interest, and at the end of your case, the loan is paid off and you own your car free in clear. So how does it work?
- You must meet the following criteria:
- If you meet the criteria, you must provide proof of the value of the car.
- Your Chapter 13 plan must provide that the lender is paid the entire cramdown value of the car over the life of the plan, plus interest (which is often lower than the contract rate of interest).
> The loan must be for the purchase of the car. You cannot cram down a car loan unless you borrowed the money for the purpose of buying the car. If you refinanced a car loan or if you got a personal loan and put your car up for collateral, you don’t qualify for a cramdown.
> You must have borrowed the money at least 910 days prior to the date you filed your bankruptcy case. That’s about 2.5 years. If you bought the car less than 910 days before you filed your bankruptcy, you can’t cram down the loan.
A bankruptcy attorney Dallas TX at Collins & Arnove can help you determine whether you qualify for a cramdown. A cramdown can save you thousands in principal and interest on your car loan and get the lien off your title faster. Every situation is different; call (972) 516-4255 to set up a consultation with an experienced Dallas bankruptcy lawyer and find out if a cramdown could work for you.
Collins & Arnove | Bankruptcy Attorney Dallas TX | 972-516-4255