Many individuals who are considering filing for bankruptcy are interested in what is known as a car loan cram down. What is a car loan cram down, how does it work, and when may it be utilized for you? Here, learn all about this interesting mechanism of bankruptcy proceedings.
A car loan cram down is utilized for individuals who currently have a car loan in which they owe more on the loan than the car is currently valued at. In other words, your car is worth less than your remaining debt on it, which is certainly not a good position for you to be in.
This happens to many people, as vehicles can depreciate quickly, and this is particularly the case when loans were made for long periods, and little or no money was put down, meaning the loan carried the full sale price of the car when you purchased it .
With an auto loan cram down, you can then reduce the remaining principle balance of your debt to the actual value of the car. In certain instances, this can potentially save you thousands of dollars. Since you owe more than the car is worth, only the actual value of the vehicle is secured by your lender. This means that, they would only receive the actual value if they resold the car, and therefore, the remainder above that value represents unsecured debt.
It’s important to note that the option to cram down your car is not available with all types of bankruptcy cases. Specifically, it is available for those filing chapter 13 bankruptcy. After you cram down your car, the newly reduced and remaining balance will be paid according to the payment plans you establish during your bankruptcy case.
It’s also important to note that cramming down your car has another benefit to you as well. It can be utilized at the same time to reduce your auto loan interest rate. Now, you owe less on the car, you don’t have more debt than the car is valued at, and the remaining balance which you have to pay will be paid at a lower interest rate.
As always, be sure to consult with an experienced legal professional who will be able to guide you through this process. To maximize the benefits of bankruptcy and successfully utilize mechanisms such as car loan cram downs, you need the experienced hands of an attorney who is intimately familiar with the bankruptcy process and all of the many regulations in place.