Deciding to File for Bankruptcy Can Fix Your “Too Expensive” Car Issue
Personal bankruptcy offers a number of options to address this “too expensive car” problem. The easiest choice would be to use the power of bankruptcy to cancel contracts and surrender your vehicle back to the lender. In a Chapter 7, any deficiency balance will be discharged as an unsecured debt, and in a Chapter 13, any deficiency balance will be paid as an unsecured debt, often at pennies on the dollar – if the lender even bothers to file a proof of claim.
Another option would be to use the cram down provision in the Bankruptcy Code to restructure your vehicle installment loan as part of a Chapter 13 bankruptcy. Applicable, if your loan originated more than 910 days (about 2 ½ years) prior to filing, a Chapter 13 cram down allows you to modify the interest rate (usually) and to reduce your outstanding principal balance to equal the fair market value of your vehicle. If you owe substantially more than the value of your vehicle, this cram down can save you thousands of dollars.
Even if you cannot cram down your loan, you can still reduce your monthly payment by including the unpaid balance in your Chapter 13 plan and setting a payment to the vehicle lender that fits your budget. You are not obligated to pay the contract rate to the vehicle lender in a Chapter 13.
However, if you are having or foresee problems with payments due to one or more vehicle lenders, you should certainly learn about and consider your bankruptcy options.
Cibik & Cataldo P.C. has provided superior, cost-effective debt-relief services to clients throughout Pennsylvania for over 35 years. Our attorneys focus solely on consumer and business bankruptcy matters and are experts in chapter 7 and chapter 13 bankruptcy law. Michael A. Cibik, Esquire is a partner at the firm and one of the few attorneys in the Philadelphia area certified by the American Bankruptcy Board. If you or someone you know is having financial trouble, please call us at 215-735-1060 for a free consultation.
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