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Understanding cramdowns on vehicle loans

After months of trying to keep on top of a difficult financial situation, things only seem to be getting worse. You are being harassed on the phone by creditors, and now you are receiving notices that your lender will soon repossess your car. However, you need your car to get to work. Without a vehicle, you would have a harder time paying your bills. This is not an uncommon scenario for Florida residents, unfortunately.

Is there anything you can do to keep lenders from taking back your car? If you have a steady job and income, you might consider filing for Chapter 13 bankruptcy and cramming down your auto loan. Loan cramdowns, as FindLaw explains, involve reducing the principal balance of your debt to the value your car is worth, which the lender secures. The following points can help clarify how cramming down a loan works:

  • If your car is worth $8,000 but you owe $15,000, the remaining $7,000 may be lumped into the rest of your unsecured debts during a Chapter 13 bankruptcy.
  • After you complete your Chapter 13 plan, you have wiped clean your remaining unsecured balances, including the exceeding amount you crammed down.
  • By making regular payments to the bankruptcy trustee during Chapter 13, you may avoid having your vehicle repossessed while getting your monthly debt payments set to a manageable amount.
  • After you cram down your loan and successfully complete your Chapter 13 bankruptcy, you own your car free and clear.

Filing for a Chapter 13 bankruptcy may reduce the stress and anxiety you are constantly feeling over your overwhelming debt and the possibility of losing your car. As you might imagine, being able to cram down the debt on eligible secured property, such as your vehicle, can greatly relieve your financial burden and give you peace of mind.

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