Upside Down on Car Loan – Chapter 13 Cram Down Provisions and Chapter 7 Redemption

Clients often find themselves in need of debt relief because of a car loan gone badly.

Modern day society necessitates owning and maintaining an automobile which sometimes evolves into a devastating financial burden. Lenders are quick in financing vehicles knowing borrowers highly prioritize automobile transportation over most other financial obligations. Even borrowers with bad credit are fitted into an automobile financing packages priced at high interest rates to compensate aggressive lenders for the added risk.

Financial difficulty often arises from auto financing. The happy car buyer drives their new vehicle off the lot financed nearly 100%. As the saying goes, almost immediately thereafter, the new vehicle depreciates in value several thousand dollars before it is even hits the highway.

Automobile transportation costs $ 4,000.00 to $ 6,000.00 annually including auto loan payments, liability and collision insurance, repairs and maintenance and gasoline.

Havoc begins when an unexpected car repair not covered by warranty, or a motor vehicle accident, unexpectedly and substantially decreases the value of the vehicle far below the outstanding loan balance owed to the bank. Or, perhaps more harmlessly, on a trade-in for a new vehicle where eager car salespersons and lenders agree to take in your old vehicle on trade, and throw the remaining outstanding balance from your old car loan (for a little higher payment) on the back-end of your new auto loan leaving the new car buyer considerably 'upside-down' on the new vehicle purchase.

These situations leave the borrower in a predicament where sizable portions of income are devoted towards covering an unsecured auto debt obligation that is of no use towards sustaining modest costs of necessities for family living.

Under certain circumstances relief from these devastating financial predicaments can be obtained through a bankruptcy filing.

CHAPTER 13 CRAM DOWN PROVISIONS

Under Chapter 13 of the United States Bankruptcy Code, Debtors are permitted to 'Cram Down' the unsecured portion of their auto loans to the fair market value of the vehicle securing the loan. This requires debtors to pay back only the secured portion of the auto loan, but the unsecured balance is treated as a general unsecured creditors providing substantial benefit for the Debtor, permitting Debtor to only pay a small fraction of the unsecured portion of the auto loan debt that is owed.

As an example, let's suppose our debtor owns a car worth $ 10,000.00 and there is an auto loan with a payoff balance of $ 20,000.00. In this scenario, the loan is only partially secured. The auto lender is secured only to the extent of the value of the vehicle or $ 10,000.00. The remaining $ 10,000.00 balance on the loan is unsecured. In this situation the Bankruptcy Code affords the Debtor the right to cut off the unsecured portion of the auto loan and treat that portion of the loan as unsecured. So, if General Unsecured Creditors were only receiving a dividend of 20%, the auto lender would receive only $ 2,000.00 on its unsecured portion of the auto loan.

These situations become sticky between Debtor and Lender because often disagreements arise as to the correct value of the vehicle. Your bankruptcy attorney will need to negotiate a settlement over the valuation before confirmation of the Debtor's Chapter 13 plan.

Valuation is guided under provisions of the United States Bankruptcy code, specifically 11 US Code § 506 – Determination of Secured Status.

11 USC §506 (a) (2) specifically states:

"If the debtor is an individual in a case under chapter 7 or 13, such value with respect to personal property securing an allowed claim shall be determined based on the replacement value of such property as of the date of the filing of the petition without deduction for costs of sale or marketing. With respect to property acquired for personal, family, or household purposes, replacement value shall mean the price a retail merchant would charge for property of that kind considering the age and condition of the property at the time value is determined "emphasis added

The Cram Down provision under the bankruptcy code also provides for a reduction of the interest rate on the auto loan. Often Debtors find themselves shelling out enormous auto payments used to cover exorbitant interest rates auto lenders often charge to risky borrowers.

An interesting exception was enacted under the 2005 Amendments to the United States Bankruptcy Code prohibiting cram downs where the purchase money auto loan was originated within 910 days (2 ½ years) of the filing date of the Chapter 13 bankruptcy [see 11 USC §1325 ( a) (9)]. Debtors must consider timing of a Chapter 13 filing if they desire to escape the burden of a burdensome auto loan debt. Bankruptcy rules require car loans taken out within 2 ½ years of the bankruptcy filing must be paid as agreed.

CHAPTER 7 REDEMPTION

Cram downs are not permitted under Chapter 7 bankruptcy (or 'straight bankruptcy'). But, Chapter 7 debtors are permitted to 'redeem' personal property under 11 USC §722.

11 USC §722 provides as follows:

"An individual debtor may … redeem tangible personal property intended primarily for personal, family, or household use, from a lien securing a dischargeable consumer debt, if such property is exempted under section 522 of this title or has been abandoned under section 554 of this title, by paying the holder of such lien the amount of the allowed secured claim of such holder that is secured by such lien in full at the time of redemption. " emphasis added

Redemption, however, can be difficult under Chapter 7 because debtors must pay upfront in full a lump sum of cash an amount sufficient to pay the secured portion of the auto loan measured by the fair market value of the vehicle at the time Debtor seeks to redeem the vehicle. Chapter 7 does not permit a restructuring of the loan, but sometimes the auto lender will accept payments over time, but usually within a short term.

CONCLUSION

If your vehicle is worth less than you owe on it, bankruptcy options can be advantageous towards affording you to retain your vehicle and move towards better financial health.

Chapter 13 can reduce or 'cram down' your loan balance and interest rates thus lowering your auto payment making it affordable. Chapter 13 also enables you to restructure past due auto payments and spread them over the term of the Chapter 13 plan so you can afford to catch up the past due payments within your personal financial means.

Chapter 7 bankruptcy does not accommodate restructuring of loan repayments but the §722 redemption provisions allow debtors to purchase their vehicles out of bankruptcy for the fair market value of the vehicle, leaving the unsecured portion of the debt discharged under the Chapter 7 bankruptcy.

Car Repair Loans – Do They Exist?

Car repairs are expensive. While the initial cost of a car might not be that much, bringing that same car to the mechanic can easily empty your bank account. Hundreds of people lose money every day due to a car that doesn’t work properly. If you rely upon your car to get to work, to pick up your children, and to simply get around town, you know how important your vehicle really is. But, what can you do if you just can’t afford to pay for those pricey car repairs?

Have you considered applying for a car repair loan? That’s right – car repair loans do exist. These loans are reserved exclusively for those that cannot pay for car repairs up front. While traditional lenders might provide loans to those with stellar credit, these lenders hardly every approve any kind of loan for those with poor credit. If your credit report isn’t something that you are proud of, you can take solace in knowing that there are private lenders out there that will approve a car repair loan for you – no matter what your credit report might look like.

How does this type of loan work? While customary lenders will base your loan entirely upon your credit history, other private lenders will base a loan only upon your assets. This means that your bad credit report doesn’t matter at all. All you need to have is some form of steady income, a car that’s less than eight years old, car insurance, and a clear car title. Car repair loans through bad credit lenders are the easiest and most efficient way to fix your vehicle. Car owners with no credit, bad credit, and a history of bankruptcy can gain a specific car repair loan. This type of loan is also perfect for truck drivers.

Car repairs might cost a lot, but repairing a large truck is another kind of expense altogether. If your rig needs major alterations, don’t skip another day of work. There are lots of loads out there that you might be missing out on if your truck doesn’t work properly. Still, finding the money to repair a large truck might seem like an impossible feat. If you are stuck in this situation, you should know that car repair loans can apply to you as well – regardless of your credit history.

You’ll also be happy to know that paying back this kind of loan is also easily attainable. Monthly payments will always be well within your budget, and you’ll find those repayment terms easy to follow. Why should your credit report prevent you from getting where you need to go? It shouldn’t. Instead, apply for your car repair loan online right now. Within moments, you should be approved for that loan that you so desperately need. Why put your life on hold due to car repairs? Instead of trying to scrape together the money for those large car or truck repairs, sign up for an Auto Title Loan… and get your life back in motion.

How to Pay Less Car Insurance Premium

Owning a car is a huge commitment on its own, but owning car insurance needn’t be. Although car insurance is a must under the law, there are various methods you can use to pay less premium and gain more protection. The first thing you should do is to discard the mentality that car insurance is a boring must-do. If you start with this thinking, chances are you are going to take whatever that is served to you and take the shortcuts to getting your car insurance and forget about it.A general rule of thumb is not signing up with the first company you come across. At this stage, you basically do not know what other company have to offer. Needless to say, you should be comparing four or five companies and pick out the best one. But if you are like other normal folks, going from one company to another is not your idea of fun. So what you can do is turn to the internet! By keying in simple information such as your location, age, gender and car details, you can get hold of auto insurance quotes from various companies in a matter of minutes.Before you proceed to get an online quote, there are various things you need to know in order to secure the best insurance rate. You need to understand how insurance company determine their premium rates so you can work these factors to your advantage. Try to think from the insurance provider’s perspective.Basically, your insurance provider will want customers who are ‘low risk’. What this mean is you need to convince your insurance company that you are a careful driver who are not likely to make a claim. Also, insurance company need to assess how much they likely need to pay you if you do make a claim.For example, if you have past records of road accidents stretching back as far as six years ago or have been issued plenty of speeding tickets, you could be paying a higher premium. The same thing applies if you drive an expensive or new car that will require a higher repair cost. So, as you can see, figuring out insurance premium is really not complicated at all.Also, the more frequent you use your vehicle and the mileage you go, the more likely you are to be involved in a car crash, as far as your insurance company are concerned. Even the neighborhood you reside in can play a role. Staying in a safe suburb rather than the city slump can reflect in your premium quote too, due to lower possibility of theft and vandalism.A big mistake made by the majority of car owners is buying and forgetting about their car insurance policy. Your car insurance provider will slowly get a clearer picture of what kind of driver you are and your ‘riskiness’ could have decrease since the time you sign up for the policy, especially if you have been maintaining a clean record. Overtime, you may be eligible for discounts that is not made available to you before. To see if you qualify for such discounts, make a review of your policy with your insurance provider every year.These are only some of the things you can look into to get a better premium rate. In fact, there are many more details you can work on to secure a better quote. The key is to be an informed consumer and adopting a proactive approach to car auto insurance.

Go Beyond Car-Cleaning and Into the World of Detailing

As springtime approaches, households across the nation will be looking forward to longer days and brighter mornings with the hope of being able to spruce up the house and get ready for a long hot summer (we hope!).Whilst many will consider the home to be the first priority for this, there is a hard core of enthusiasts who have far more important things on their minds – they are absolutely committed to making sure their vehicles are the brightest and cleanest in the neighbourhood. They’re the army of ‘detailers’ who spend hours on their pride and joy making sure ever millimetre of paintwork is gleaming, every section of chrome is shining and every exposed pipe and tube is absolutely spotless.The world of the detailer is as intense of that of any enthusiast’s hobby with a whole host of companies providing specialist equipment and products that vie to be the best in the business and win the vote of the majority of detailers.Their products are discussed at meets, in clubs and of course, on the Internet in many of the extremely popular detailing discussion forums. It’s here where many detailers get their first taste of the world.But there are also many people who are willing to give advice directly and a great number of these, frustrated with the products being sold by the large chain retailers have set up their own businesses and now sell the products that they use to others in the scene.Of course, it’s not just hobbyists that benefit from the hard work put into the creation of these products, many commercial ventures have sprung up that will promise to make your car look better than when it was in the showroom, often at amazing prices (by amazing, I mean high – sometimes thousands) and they pride themselves on their attention to detail.It’s not just a valet, it’s an entire car make-over and after you’ve parted with your hard earned cash, it can take weeks before you see your car again, but you may not recognise it when it returns. You see the very best detailers go to amazing lengths to ensure the car is free from dirt and grime and this can involve taking ear-buds and toothbrushes to parts of your vehicle that you didn’t know existed.Coupled with an understanding of how light bounces off paintwork, an incredible knowledge of the various chemicals that can be used to better reflect this light and an amazing eye for quality, you will end up with a car that you could go on to show.The good thing is though, these results are possible for anyone to do given the time, the right inclination and an understanding wife who won’t mind you spending days on end in the garage.

Guide To Selling Your Car – Get The Best Deal

There are many options to consider when selling a car privately. This guide will help you explore those options and assist you throughout the whole process.There are 4 main options when it comes to selling your car.Private SaleThis option is probably the way to get the most for your vehicle, although it will more than likely be the most stressful way too. Be prepared to have a few potential buyers turn up and view your car, and usually haggle with you on price. If you can handle the pressure, then this type of sale will see a better return than most ways. Obviously you will not be pricing your vehicle at dealer prices, but then you are not offering the add-ons that dealers will usually have to provide.Trading The VehicleThe hassle free option in selling your vehicle will be to trade it to a used car dealer. You will be offered less than you would via the private sale, but you will be without the stress of it too. Take your car to a local dealer and ask them to evaluate the vehicle, you will usually be offered a quick sale at a lower cost, but then the dealer has to try and make a profit so its totally understandable.Selling Via AuctionAs with the Trading option, an auction sale can be hassle free, but as with the Trading option, you will more than likely see a smaller final value for your vehicle. Be prepared to have some potential buyers come and view the car, but you won’t feel so pressured into getting a sale, as your car will hopefully be being watched by a number of future bidders.Scrapping The VehicleIf your vehicle has failed its MOT or has a serious mechanical problem, you may be considering scrapping it for its basic scrap metal value. Try and make sure that if this is your only option, that you are provided with evidence that the car has been scrapped. You may also consider breaking the car, selling different parts from your vehicle to buyers. Once again there are good auction sites where this method is quite popular.Here is some advice on how to try and get the most for your car if selling it privately or to a trader.ValuationsThere are a number of valuation websites on the internet which will give you a good idea on what kind of price you should be looking for, for your car. Do a search on Google for Parkers Guide or WhatCar and you will be able to find a good guide on what to expect.Do some research on similar cars for sale in the local press or in various magazines selling cars, even take a look at local dealers and the auction sites to get a general idea of what price to pitch your vehicle at.ConditionTake in to consideration the age and the mileage of your vehicle, if it is an older model with less miles on, it may be worth the same as a newer model with higher miles.The general condition of the vehicle is a good guide on how much to expect for your car, if the bodywork and the mechanics of the car are all in good order then you can expect to ask for a little more than an average condition model.MOTA vehicle with 12 months MOT will always be more appealing to a buyer than a car with less than a full MOT, if you are in a position to put your car through an MOT if it has less than 8 months on, then you will have more interest for sure.Selling PointsIf the vehicle you are selling is a high specification model of that particular make then make sure you are advertising the points. Things like Air Conditioning and Alloy Wheels will have a positive impact on your target audience.Preparing your car for sale is a vitally important stage of the process, if you are to make a good impression on the potential buyers.The phrase “first impressions last” comes to mind when first turning up to view a car for sale. Its a fact that scuffed, dented, paint chipped, untidy cars are not the biggest attraction for any buyers. Not only will having prepared your car have a positive effect on your potential buyers first impression but it will also enable to ask for that little bit more in price. Buyers would much rather spend a little extra on a car that looks like it has been taken care of and is in good shape.Engine BayHave a look and top up all the levels under the bonnet, things like oil, anti-freeze & even the washer bottle, its the little touches like having topped up levels that give the impression that the car has been cared for and maintained.InteriorClean out those ashtrays if you are a smoker and hoover up those dog hairs if you are a dog owner, these are the 2 most off putting things to see in a used car. Spend a little time just tidying the inside of the car, a little polish here and there and a good vacuum will be pleasing on the eye of any buyers.Tyres & WheelsIt is a well known saying to “tyre kick” and you can be sure that your potential buyer will check the wheels and tyres on your vehicle. A missing wheel trim can really have a negative effect on the look of any car, and tyres with low tread will also be a put off, the buyer is not going to be impressed if he has to go and spend more money on getting the car legal.Find Out Your PapersThere is nothing more frustrating as a car seller, than when it comes to the point of filling out the logbook and showing the current MOT certificate, you can’t find it. Make sure that before you instruct any potential buyers to come and view the car, that you have your docs in a handy easy to reach place.The single most important factor in selling your vehicle, the advert.This is the introduction to your car for all of the potential buyers and it needs to be as appealing as possible without sounding to over the top, wording an advert can be a fine art, and can result in a nice easy sale, but can also result in very little contact at all.10 Must Have Things To Include In Your AdvertYear of vehicle manufacture and registration letter/number Make & Model Colour Condition Mileage Service History – if applicable Number of owners Price Contact Information Any Warranty Information – if applicableWhen writing your advert for online, newspaper, magazine or any other publication, make sure to include those 10 important factors in your advert. Honesty is the best policy when it comes to an advert, there is nothing worse than turning up to a vehicle that has been advertised as immaculate but it turns out to be far from that.The first contact you will usually have in the process of selling your vehicle will be over the phone, try and remain polite and answer all questions honestly without to much of a pause. Arrange a suitable time for your potential buyer to come and view the car, do not arrange for a time where you may have to rush the viewer as this will most certainly put them off. Serious buyers are likely to take their time in viewing and will not appreciate being rushed.Never make an appointment for late in the evening and never make an appointment for a location other than a familiar location such as your home or a family/friends residence.Buyer ArrivalAs the buyer arrives, meet and greet them in a polite manner, ensure you do not appear desperate to sell your vehicle. It is a good idea to have all the doors unlocked and be on hand to open the bonnet when asked. At no point in time should you leave the car and the buyer with the keys unattended with the vehicle. Be on hand to start the engine and accompany on a test drive, but only when requested, also ensure that the buyer has the relevant insurance cover to drive your car. It is a good idea to leave the buyer to have a good look around the car alone (without the keys) to give them the opportunity to examine the car without fear of being watched over. They will feel more at ease and be more comfortable in making sure the car is exactly what they are after.Test DriveUsually the buyer will make a request to test drive the car. Ensure that you are in control of the situation of all times, never leave the keys unattended while you exit the car, as this is a prime opportunity for a thief to make off with your vehicle. The best advice whilst on the test drive is to remain quiet, let the buyer test the car, they would prefer to make their own decisions on the way the car feels than having you talking in their ear for the duration.Sealing The DealOften the most nervous moment in the process is in discussing the deal. The advice here is to state the price that you are asking for the car, and await the response of the buyer. There is absolutely no point in offering a lower price than advertised prior to stating your original asking price, that will make you look either desperate or silly, and neither is good.Have an idea in your mind of what your bottom price is, the lowest you are willing to accept, and wait for the buyer to come back with their response to the asking price. Rather than accepting the first offer from the buyer, and rather than dropping £100 straight from your asking price, try and decrease your asking price in lower sums, like £25. Do not be knocked down lower than your lowest price.Remember all the positives on your vehicle, and use those to justify the asking price.Note: Do not stop taking enquiries on your vehicle until you have received payment in full.Ok, so you have found your buyer and agreed your price for the sale to go through. You are still at risk of being caught out by a fraudster or thief, so follow these tips and you should remain out of trouble.As soon as the price is agreed, take a non-refundable deposit from the buyer, that way, if the buyer for any reason pulls out of the sale, your time will not have been wasted in its entirety.You may hand over the keys when, and only when, the price has been paid in full for the car and the money is either in your hand or clearer in your bank account.Write or type 2 sale agreements, one for you and one for the buyer, both should be signed and dated. On the agreement you should include:Your name and address Buyer name and address Car details – make, model, VIN number, registration and mileage. Price details, including the word “paid” if paid, and also add confirmation that the vehicle is “sold as seen”.The final stage of this car selling process is to inform the necessary parties of the transfer of ownership.Legally you must provide the DVLA with confirmation that the car has been transferred to a new owner. Fill out the V5c logbook while the buyer is still with you and ensure all the details are correct. Then post your logbook of to DVLA, Swansea.If your vehicle is on a national security register, you must also inform them of the sale, and give the details of the new owner.If the car is still under warranty, you will also need to inform the warranty provider with these details.and that should be about it….We hope our guide has helped you and we wish you all the best in selling your vehicle, wherever it may be.