Reduce your car payments with a Chapter13

If you are paying more than 10% interest in your car loan, you are paying way too much.
Bankruptcy Chapter 13 gives the option of reducing your car loan interest rate down to approximately 5.5% (on a case by case basis), paying off the loan balance over a 5-year plan. This will translate into substantial savings over the course of the years.


Also, bankruptcy laws provide that if you obtained your loan more than 910-days (about 2 ½ years) prior to filing for Chapter 13 bankruptcy, you will be able to pay the “real” fair market value of the car based on mileage and condition, NOT the actual loan balance. For example, if you owe $30,000 on your car loan and the car is only worth $15,000 after almost 3 years of use, then, Chapter 13 bankruptcy will allow you to pay the fair market value of the car of $15,000 over 5 years, thereby saving you approximately $15,000 plus interest, translating into substantial savings.


Usually filing a Chapter 13 bankruptcy only to reduce your car payments is not worth doing unless you also have some other debts, like credit cards or tax debts, given the cost and commitment involved in filing a Chapter 13. If you are struggling with your car payments, give us a call and we can run calculations for you to see if filing a Chapter 13 may be a good option.