Seymour's Blog

Reduce Your Car Payments

Chapter 13 can help you substantially reduce your car payments. Many people are paying high interest rates on their car loans. When you file a Chapter 13 bankruptcy, we can usually help you reduce your interest rate to somewhere in the vicinity of 5.5%, and the reduction of your interest rate can save you thousands of dollars over the course of your car loan.

In addition, many of our clients can also reduce their car payments even more by reducing the actual balance they have to pay to the car finance company. This is permitted if you have owned your vehicle for more than 910 days (approximately 2 and ½ years), and your vehicle is worth less than the balance due to pay it off.

The way your car value is depreciate, many of our clients own cars that are worth substantially less than what they owe the finance company. The great thing about this is that they can often qualify for what is a called a cram down, which legally gives them permission to reduce their car payments based on the actually value of the car. Here is a simple example: Let’s assume that our client bought his car more than 2 and ½ years ago for $20,000. He has been making his car payments, but he still owes $12,000 to pay it off. The car has high mileage, and when we look up the book value, we see that its fair retail value as of today is only $7,500. The car is actually worth $4,500 less than what our client owes to pay it off.

Good news is that we can substantially reduce our client’s car payments, because Chapter 13 permits us to do pay the value of the car, instead of the actual amount owed, as long as the vehicle has been owned for more than 910 days.

In this example, our client might be making car payments of $500 a month, and when we cram down the vehicle payments, he might only be paying $250 in the Chapter 13. We also can reduce the interest rate to about 5.5%.

The amount you are going to pay is based on the actual value of your vehicle. The book values give us a general idea as to what the car is worth; however, your car might be worth less than the actual book value. For example, you might have some body damage to the vehicle, the car might have high mileage, the vehicle might have been in an accident that depreciated its value, and there could be other problems that make the vehicle worth less.

When you cram down the vehicle, you only pay based on the actual value of the vehicle.

It has saved many clients $5,000, $7,500, or even more on their car payments when we successfully cram down their vehicles.

If you believe that you qualify for a cram down, please let us know, and we will do the best to reduce your car payments to as small of a amount as legally permitted.