BankruptcyLawyerHonolulu: Chapter 13 - How it can help you reduce your auto loan payments
Stretch out payments, reduce interest and the "910 day" rule
By Honolulu Attorney, Brian Kawamoto
No matter how long ago you bought your car, you can "stretch out" your automobile loans over the life of your chapter 13 plan, generally which is 3 to 5 years. So if your loan has two years left and you are struggling to make that payment, if you select a 3 year Chapter 13 plan, then you can stretch those payments out over the next 3 years (instead of the two years per your loan contract). In addition, you can lower your interest on your auto loan to the "till rate", both these changes could result in lowered monthly auto payments for you.
If your car loan was taken out more than "910 days" ago*, you have another benefit by filing a Chapter 13, you could also strip down your auto loan to the current fair market value of your car, this could also result in a lowered loan balance for you. For example if your car is worth $6,000 but your "910" auto loan balance is $11,000, you need only to pay $6,000, plus "till rate interest" as determined by the court to keep your car under a Chapter 13 plan. What happens to the other $5,000, well that becomes an "unsecured loan" and the creditor will receive whatever the other unsecureds will receive under your plan. Stripping an auto loan down to the value of the collateral however requires that your attorney file a separate motion with the court seeking the court's approval.
*Cars purchased for your spouse or children, or for business, but not for yourself may be outside this 910 day restriction. In other words if the car is not for your personal use, you may not have to wait out the 910 day period in order to cram down the auto loan in bankruptcy.
Date of this Article: March 2011
For other benefits of filing for a Chapter 13 (i.e. protecting co-signers, etc.) please see
Disclaimer - It is advised that you consult a bankruptcy attorney or lawyer in your state when dealing with your individual situation as the bankruptcy laws are complex and changes from time to time, also every state has different laws, rulings and court decisions as it concerns bankrutpcy matters.. Statements made here reflects the author's viewpoint for general reading purposes only and therefore should not be relied upon or considered as a legal opinion or legal advice for your own particular factual situation. Each situation is fact specific, and it is impossible to evaluate a legal problem without a comprehensive consultation and review of all the facts and documents at issue.