Chapter 13 vehicle loan cramdown solves a number of serious practical problems that even Chapter 7 “straight bankruptcy” can’t.
If your vehicle is worth less than you owe on it, under Chapter 7 you can keep it by “redeeming” it–paying its present value in full.
In a Chapter 7 case you “reaffirm” your vehicle loan if you want to keep your vehicle. This means you keep paying it.
Although Chapter 7 can work fine if you’re current on your lease, use Chapter 13 instead if you’re behind and need time to catch up.
If you want secured creditors to be paid in your Chapter 13 plan, they must file proofs of claim. Let’s use the example of a vehicle loan.
Chapter 13 gives you powerful ways to hold onto a vehicle, but it also lets you give up that vehicle without paying its debt.
A vehicle lease can cost you less up-front and each month, but is in reality very expensive. Bankruptcy is your way to break the contract.
A reaffirmation agreement is a document, usually prepared by your vehicle lender, which you sign and is then filed at the bankruptcy court.
You may be able to keep your vehicle for less money by “redeeming” itâpaying its present fair market value instead of the full debt.
A reaffirmation agreement makes you still liable on your vehicle loan so you can keep your car or truck after writing off your other debts.
Chapter 7 has many important features deserving appreciation.
Two similar scenarios, two very different solutions for keeping a vehicle if you’re behind on payments.
We end this series on Chapter 13 with some illustrations of how it works and why it can be so great.
Chapter 13 protects you from collection of back child/spousal support and income taxes, & can save you a ton of money on your vehicle loan.
Chapter 7 gets rid of judgment liens and older income taxes, lets business debtors avoid the “means test” and lets you keep a vehicle loan.
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