Reducing Your Car Payment through Chapter 13 Bankruptcy
Are you behind on your car payment? Is your car payment larger than your budget allows? Do you fear that your car may soon be repossessed?
If you answered yes to any of these questions, Chapter 13 bankruptcy assist you in reducing your car payment to a manageable level that you can pay every month.
How Could Chapter 13 Bankruptcy Help Reduce Your Car Payment?
In Chapter 13 bankruptcy, your debts are adjusted under a court-approved repayment plan. Under this repayment plan, monthly payments of secured and unsecured debts are restructured. Typically, secured debts, those backed by collateral, must be paid or kept current throughout the duration of your payment plan (3 to 5 years). Your “general unsecured debts” are lumped together and paid with disposable income that remains after you pay your living expenses.
You might also be able to reduce the amount of your secured debt by only paying the value of the collateral as opposed to the whole debt.
Suppose you owe $16,000 for your vehicle. Further suppose that your vehicle is only worth $10,000. In chapter 13, if your car debt is over 2 ½ years old, you may be able to “cram down” the value and pay only $10,000. The remaining portion of the debt, which is $6,000, is treated as unsecured.
In chapter 13, your vehicle loan could be adjusted so your monthly payment is calculated only on the secured part of the loan. This could significantly reduce the amount of your monthly
