If I'm filing for bankruptcy, can I keep my car and have the payments reduced to where I can afford to pay off the auto loan? 20 Answers as of February 05, 2015

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David R. Fondren, Attorney at Law
David R. Fondren, Attorney at Law | David R. Fondren
There are not enough facts in your question to answer this. Are you filing a 7 or 13? what is the auto worth? how much do you owe? Why do you think they will reduce payments? You really need professional help with a bankruptcy. This is not an area designed for self help or DIY.
Answer Applies to: Missouri
Replied: 2/5/2015
A Fresh Start
A Fresh Start | Dorothy G Bunce
Filing Chapter 7 bankruptcy will not change the terms of your vehicle loan unless you qualify for a redemption of your vehicle for its fair market value. You will need to find a lender to pull this off and the legal fees to do this are significant. Filing Chapter 13 will let you extend the repayment terms of your vehicle loan, but is only appropriate if the amounts involved are substantial, since the Chapter 13 program is very expensive.
Answer Applies to: Nevada
Replied: 2/3/2015
GARCIA & GONZALES, P.C.
GARCIA & GONZALES, P.C. | Richard N. Gonzales
It is called a 722 Redemption. Speak to an experienced BK attorney on how this works.
Answer Applies to: Colorado
Replied: 2/3/2015
Stephens Gourley & Bywater | David A. Stephens
In a chapter 13 you can, but not a chapter 7.
Answer Applies to: Nevada
Replied: 2/2/2015
The Law Offices of Ryan F. Beach, PLLC
The Law Offices of Ryan F. Beach, PLLC | Ryan Beach
You may be able to file a Chapter 13 plan which would allow you to retain the car and lower the monthly payment obligation by reducing the interest rate and the amount that is paid back as a secured claim (secured claim is paid in full, while the unsecured portion is paid back 0-100% depending several factors). Your ability to modify the auto loan will depend on several factors, such as the principal balance owed, the value of the car and when the car was purchased. You should consult with an experienced bankruptcy attorney to see what is possible for you. You may also be able to file a Chapter 7 and make the car loan more affordable by doing what's known as a redemption. By redeeming a vehicle, you are paying the market value of the car and discharging the difference between that market value and the principal balance owed. Most people who have gone through a Chapter 7 do not have the funds needed to pay the market value; however, there are companies that specialize in loans for redemption. Of course, you will want to look into what is available to you for redemption lending if you think Chapter 7 is the route for you. You do not want to file Chapter 7 only to find out later than you are not eligible for a redemption loan or there is some other prohibitive factor to what financing is available to you.
Answer Applies to: Michigan
Replied: 2/2/2015
    Janet A. Lawson Bankruptcy Attorney
    Janet A. Lawson Bankruptcy Attorney | Janet Lawson
    You can not alter a car payment in chapter 7. It can be done in ch13 if you purchased it more than 910 days ago. If you paid it off and then got a title loan, you can modify the payment in ch13 right away.
    Answer Applies to: California
    Replied: 2/2/2015
    Freeman Law Group, LLC
    Freeman Law Group, LLC | Derek Freeman
    Maybe. If you file a chapter 7 bankruptcy, you will be able to keep your car as long as the equity you own in the vehicle is less than or equal to the exemption amount in your state. You will need to state your intent to keep the car, and continue to make payments. You may be able to sign a reaffirmation agreement with reduced payments, if your lender is willing to offer it. I wouldn't count on it though. If you want to reduce payments, you can file a chapter 13, which would allow you to create a payment plan. All of your disposable income gets paid into the plan every month. You won't be paying less, but it might be more manageable in the end. You need to speak with an attorney to find out what's best for you in your situation.
    Answer Applies to: Colorado
    Replied: 2/2/2015
    Law Office of Michael Johnson
    Law Office of Michael Johnson | Michael Johnson
    You may be able to do this in a chapter 13. You should consult with an attorney to see if it will be helpful.
    Answer Applies to: Florida
    Replied: 2/2/2015
    The Law Office of Darren Aronow, PC
    The Law Office of Darren Aronow, PC | Darren Aronow
    If you are filing a chapter 7, you should ask your attorney if you qualify for a "cramdown" of your vehicle and it is possible to reduce your payment. You can also try to negotiate a lower interest rate in exchange for executing a reaffirmation agreement.
    Answer Applies to: New York
    Replied: 2/2/2015
    EDWARD P RUSSELL | EDWARD P RUSSELL
    If doing a Ch 13 you can force the vehicle loan company to take the prevailing rate which is probably 6%. In a Ch 7 as long as payments are current on the vehicle the company will agree to a reaffirmation of the debt and perhaps they will allow a lower interest rate but they don't have to do that. They will probably insist that the terms of the loan remain the same.
    Answer Applies to: Minnesota
    Replied: 2/2/2015
    Patrick W. Currin, Attorney at Law | Patrick Currin
    Only in a chapter 13 is this possible.
    Answer Applies to: California
    Replied: 2/2/2015
    Ronald K. Nims LLC | Ronald K. Nims
    To get the payments reduced you'll need to file a Chapter 13 bankruptcy. Generally car can be paid off over 3 to 5 years with an interest rate of around 5%. If you've owned the car more than 910 days, you can reduce the balance on the loan to the blue book value of the car.
    Answer Applies to: Ohio
    Replied: 2/2/2015
    Tokarska Law Center
    Tokarska Law Center | Kathryn U. Tokarska
    What type of bankruptcy are you filing? In a chapter 7 BK there is no legal ways to compel creditor to restructure the loan. Some creditors may agree to different terms but it is a voluntary thing and you'd only find out after you file the case and contact them to see if they are willing to negotiate. Some lenders won't under any circumstances, some lenders may depending on your payment history with them and your financial situation. In a Chapter 7 the available options for vehicle loans are: surrender, reaffirm, redeem, and some lenders will still allow hold & maintain. Your BK attorney should go over these and explain each of them and how they work, perhaps a redemption loan can be obtained and is appropriate. This will depend on some more facts like: age of the vehicle, it's current market value, current principal balance, and interest rate on the loan. In a chapter 13, you can restructure the loan, not by reducing principal, but by stretching out payment and adjusting interest rate to current market rate. However, you have to weight having that as an option against the costs and the process of a chapter 13. This may prove not to be your best option. It depends on more facts not disclosed such as: your "current monthly income", household size, reasonable and necessary living expenses, types and values of your assets, types and balances of your debts. Any legal advice as far as what to do can only be made after an analysis of the debtors financial picture. Hope this perspective helps.
    Answer Applies to: California
    Replied: 2/2/2015
    The Law Office of Mark J. Markus
    The Law Office of Mark J. Markus | Mark Markus
    It's possible to do in a Chapter 13 case depending on the value of the vehicle and amount owed, as long as the loan was taken out more than 910 days prior to the filing of the bankruptcy case. You should consult with a bankruptcy attorney in your area for more details.
    Answer Applies to: California
    Replied: 2/2/2015
    Law Office of Andrew Oostdyk
    Law Office of Andrew Oostdyk | Andrew Oostdyk
    Possibly, depending on your situation. When filing a Chapter 13 Bankruptcy, if the car loan is part of the Bankruptcy Plan, there are at least three ways to potentially lower your payments. 1. If you have owned the car for over 910 days (2 1/2 years) you can lower the principal value of the loan to be equal to the fair market value of the vehicle. Put another way, you can eliminate the negative equity if applicable. 2. If you have a high interest rate on your loan, a Chapter 13 Bankruptcy allows you to lower your interest rate to Prime + 1-3%. Currently the Prime Rate is 3.25%, therefore your interest rate in a Chapter 13 Plan would be 4.25% - 6.25%. 3. A Bankruptcy Plan can last for up to 5 years, which if you have less than 5 years remaining on the car loan, you may be able to effectively stretch the remaining payments over 60 months. This only applies to the payment allocated to the vehicle and does not include any debts, attorney's fees, etc. that may need to be part of your Bankruptcy Plan depending on your situation. Car loans also have the potential to be adjusted in a Chapter 7 Bankruptcy through a Reaffirmation Agreement. But, this is not guaranteed and is not required by the Bankruptcy Code, rather the Creditor must agree to the new terms. In a Chapter 7, the Creditor can insist that the original terms be honored, or risk repossession of the vehicle.
    Answer Applies to: Texas
    Replied: 2/2/2015
    John W. Lee, P.C.
    John W. Lee, P.C. | John W. Lee
    A Chapter 13 Bankruptcy will allow the debtor to repay the car note through the Chapter 13 plan. In many cases the Chapter 13 Debtor will see the monthly payment and interest rate go down. In some cases, the debtor can even "cram down" the principle balance of the automobile and see even more savings. Normally, a Chapter 7 Bankruptcy does not reduce the car payment or interest rate. You should consult with a bankruptcy attorney to determine if a Chapter 13 Bankruptcy will make your car more affordable.
    Answer Applies to: Virginia
    Replied: 2/2/2015
    The Orantes Law Firm
    The Orantes Law Firm | Giovanni Orantes
    That depends on what chapter you are filing. If you file a Chapter 7 and want to keep your car, most lenders will not modify the amount of your monthly payments. However, if you can get a new lender to loan you enough to purchase the car for its value at that time (called "redeem"), you can lower your car payments in a Chapter 7 case. In a 13, if you purchased the car more than 910 days before the date of the bankruptcy filing, you can reduce the amount of your car payment roughly to the value of the car. However, a Chapter 13 case requires that you pay at the end of the month what you have left over after you pay your expenses as determined by the Court or at least an amount equal to the unexempt value of your assets over 36-60 months. Whether you have to file a Chapter 13 case depends on your income. If your income among the to half incomes in the State and you cannot otherwise qualify for Chapter 7, you may have to file a 13. In any event, if that sounds too complicated, it's because it is. We offer a free initial consultation to go over your options.
    Answer Applies to: California
    Replied: 2/2/2015
    John W. Lee, PC
    John W. Lee, PC | Kim A. Lewis
    In a chapter 13 bankruptcy you may be able to restructure your car loan and, in certain circumstances, you can "cram down" the loan and pay back only what the car is worth. You would benefit from speaking with an experienced bankruptcy attorney to discuss your options.
    Answer Applies to: Virginia
    Replied: 2/2/2015
    Goldsmith & Guymon
    Goldsmith & Guymon | Marjorie Guymon
    The only way to do what you are describing is in a chapter 13 which requires a monthly payment for 36-60 months. In order to qualify you must have purchased the vehicle more than 910 days prior to filing bankruptcy.
    Answer Applies to: Nevada
    Replied: 2/2/2015
    Black Law Group | Clare Black
    In a Chapter 7, you can keep your car when you reaffirm the vehicle. This means you agree to be bound to the original contract. Therefore, the remaining term and payments remain the same.
    Answer Applies to: Arizona
    Replied: 2/2/2015
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