A car loan cram down is used by individuals who already have a car loan for which they owe more than the car is presently worth. In other words, your car is worth less than what you still owe on it, which is a precarious situation to be in.
This is a common occurrence due to the rapid depreciation of vehicles, and it is especially prevalent when long-term loans were taken out with little or no down payment, meaning the loan was for the full purchase price of the automobile.
With a compress down, you can reduce the remaining principal balance of your auto loan to the car's actual value. This can potentially save you thousands of dollars in certain situations. Since you owe more than the vehicle is worth, your lender is only secured by the vehicle's actual value. This means that they would only receive the car's actual value if they resold it, and the remaining amount represents unsecured debt.
It is essential to note that this option is not available in all types of bankruptcy cases. Specifically, it is available to chapter 13 bankruptcy filers. The newly reduced and remaining balance will be paid according to the payment plans established during the bankruptcy proceeding.
It is also essential to note that stuffing your car has another advantage for you. It can also be utilized to reduce your auto loan's interest rate. Now, you owe less on the vehicle, you do not owe more than the vehicle is worth, and the remaining balance will be paid at a reduced interest rate.
Always consult an experienced legal professional who can guide you through this procedure. To optimize the benefits of bankruptcy and effectively use mechanisms such as car loan cram downs, you need the assistance of an attorney who is intimately familiar with the bankruptcy process and all of its numerous regulations.
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