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Can I lower my car payment?   ...   maybe


Chapter 7

In the event that you owe much more than your car is worth you may qualify for a redemption.  Under Chapter 7 a redemption allows you to pay off your car at its current market  value and wipe out the remaining portion of the car loan.  In the right circumstance you might qualify for a new loan to pay off the current value of your car, which can result in a car payment at a much lower amount.


Chapter 13

You may be able to reduce you monthly car payment by including the balance of your car note into a Chapter 13 plan and then paying it off over the term of the plan, which can be from 3 to 5 years.  If your car loan was scheduled to be paid off sooner, you will end up paying for a longer period of time, but at a more affordable monthly amount.

In the event that you owe much more than your car is worth you may qualify for a redemption.  Under Chapter 7 a redemption allows you to pay off your car at its current market  value and wipe out the remaining portion of the car loan.  In the right circumstance you might qualify for a new loan to pay off the current value of your car, which can result in a car payment at a much lower amount.

Chapter 13 might also provide another option to help lower your car payment.  If you owe more than the car is worth and have owned your car for at least 910 days or approximately 2 ½ years, you may be able to “cram down” your auto loan balance by offering to pay the current value of the vehicle at a low interest rate, rather than the actual balance owed and the contract rate of interest. 

The current bankruptcy laws do not allow for a reduction of your mortgage payment.  This was taken under consideration during the last overhaul of the bankruptcy code in 2005.  In light of the economic crisis in the housing industry this could have been an important tool to help homeowners deal with the plummeting home values and their financial struggles.  Contact your congressman/congresswoman and senator to let them know how you feel about this issue.  Perhaps the next time they review the bankruptcy laws they will include this much needed avenue of relief. 

Contact Heller & Richmond, Ltd. to determine whether or not either Chapter 7 or Chapter 13 may help you qualify for a lower car payment.




Phone: 312-781-6700  or e-mail: MRichmond@Hellerrichmond.com



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