Auto Loans
Auto Loan Cramdowns in a Chapter 13
In a Chapter 13 Bankruptcy (one that involves monthly payments over time) some auto loans can be "crammed down." This means that if your outstanding auto loan exceeds the value of your automobile, you need only pay the creditor the actual value of the auto. For example, if you own a car that is worth $5,000 but there is a loan against it for $10,000, you can plan to pay only $5,000 for the loan and pay that over a period of time (usually 60 months). With the power of the United States Bankruptcy Code, you can pay moneylenders the actual value of your car - not the fictional value imagined in a creditor's computer. Further, the amount you owe on the vehicle can be stretched over the life of the Chapter 13 plan. This can be helpful to people's budgets.
Auto Loans in a Chapter 7
Most people choose to keep their auto loans in a Chapter 7 bankruptcy. They retain the automobile and pay the loan as they otherwise would.
For those who choose to surrender their vehicles prior to filing, bankruptcy is usually able to eliminate deficiencies sought by creditors after repossession.