The infrastructure in Alabama is sprawling, and that means a car is critical for most families’ daily activities. Unfortunately, the safest and most reliable cars often come with large payments. Chapter 13 bankruptcy may be able to help you reduce your regular payments, and an attorney from The Gil Law Firm in Dothan, AL, will show you how.
What Is A Car Loan Cramdown?
A cramdown is a method of reducing the interest rate and principal balance of a car loan, personal property loan, or investment property loan. Each type of loan has its own restrictions when it comes to taking such an approach, but with a cramdown, it is entirely possible to reduce your interest rate on a vehicle loan by filing for Chapter 13 bankruptcy.
How Does A Cramdown Work?
Since cars depreciate the moment you drive them off the lot, it is not surprising that many people who are struggling financially often owe more on their vehicle than it is actually worth. Luckily, you can use a car loan cramdown to resolve this predicament.
For example, say you purchased a car in 2012 for $20,000, so you took out a loan in that amount. Today, you still owe $15,000 on the loan, but the car is only worth $10,000. A cramdown reduces your loan balance to $10,000, because that it is the retail value of the car.
By filing for Chapter 13 bankruptcy and taking advantage of the car loan cramdown, you can reduce your total loan balance to $10,000 and lower your interest rate at the same time, making payments far more manageable for the future. The bankruptcy court will set your new interest rate, which will be dependent on the district where you reside.
If you are struggling to pay back debt that you’ve taken on, an attorney from The Gil Law Firm in Dothan, AL, will determine if you are eligible for Chapter 13 bankruptcy. Visit their website to learn more about their experience in debt consolidation, and call (334) 673-0100 to schedule a consultation today.