There is a law in bankruptcy that allows you to pay the value of your vehicle to the creditor instead of the balance owed to the creditor. This is known as a cramdown. It is an amazing tool that saves many people thousands of dollars. To qualify, your vehicle must have been purchase over 910 days (around 2 and a half years) prior to filing chapter 13. It is only used in a chapter 13, which is a payment plan type of bankruptcy (as opposed to a chapter 7, which is not a payment plan). You essentially pay the chapter 13 trustee for 3 to 5 years (length depends on your income and/or other factors) and the chapter 13 trustee pays your vehicle. The cramdown also lowers the interest rate as well if the interest rate is high. Right now the interest rates you can pay in a cramdown is around 6.5%.
So, for example, lets say your 2014 Ford F-150 Lariat was purchased on or before December 5, 2019, and you file bankruptcy today, June 4, 2019. That is over 910 days ago. You now qualify for a cramdown. So how does this help you financially? MANY WAYS. First, lets say your balance on the F-150 to pay it off is currently $29,750.00, and your interest rate is 14.00%. Now lets say NADA bluebook values your vehicle at $20,000.00, without considering mileage. Well guess what? In an ideal, perfect cramdown, you pay the creditor $20,000.00 at 6.5% interest and get the title to your vehicle at the end of the plan. NOW EVERY CASE IS DIFFERENT, THIS IS JUST IN GENERAL, IT MAY NOT WORK FOR YOU THIS PERFECTLY DEPENDING ON YOUR INCOME. YOU ALSO NEED TO KNOW THE CREDITOR WILL DISPUTE THE VALUE IF IT IS THE LOWEST ONE PICKED OR NOT THE PROPER ONE TO USE. THERE ARE OTHER FACTORS, THIS IS A GENERAL RULE WITH EXCEPTIONS THAT ARE UNIQUE TO EACH CASE. Therefore, you might need a bankruptcy lawyer to help you.
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