By: Samuel Q. Pittman
The Bankruptcy Code limits the amount of a creditor’s claim on your vehicle to the value of the vehicle at the time of filing. If the debt on the vehicle is greater than the value of the vehicle, then the debt is split into two components, a secured claim for the value of the vehicle, and an unsecured claim for the remaining balance. To keep your vehicle in a Chapter 13 Bankruptcy, you must pay the secured claim in full, however, only partial payment of the remaining balance may be required. If your vehicle loan is more than 910 days old, or if your vehicle loan includes negative equity from a prior vehicle loan, you may be able to take advantage of this provision of the Bankruptcy Code, which is sometimes referred to as a “Cram Down.”
As an example, one of our recent Chapter 13 Bankruptcy clients was able to eliminate nearly $19,000.00 of negative equity in her vehicle. In this case, the vehicle loan was over 910 days old, the loan amount was $29,422.84, and the value of the vehicle was only $10,360.00. Through her Chapter 13 Bankruptcy Plan, the client will pay back $10,360.00 as the secured portion of the debt, and less than $200.00 on the remainder, for a total of approximately $10,500.00, saving the client nearly $19,000.00. These figures are for purposes of illustration only and the actual elimination or reduction of negative equity varies based on the facts of each Bankruptcy case.
To determine if a Chapter 13 Bankruptcy might be solution you need, please call our firm and schedule a free consultation with one of our experienced Bankruptcy attorneys.