My car payments are too high for me to pay. Can I modify them in a bankruptcy?

One of the many reasons why individuals file for bankruptcy is that they are unable to make the monthly payments. It can be utility bills, apartment rentals or car loans. This is the reason why you have to determine what type of bankruptcy you have to apply for. If you filed for Chapter 7, then you probably have to say goodbye to some assets since this is called as a liquidation type of bankruptcy. Now Chapter 13 offers you something more.

Under Chapter 13, auto loans may be modified. It is possible that you will pay less making it easier for you to make the monthly dues. However, keep in mind that this is not true for all individuals. The court has to determine if it is indeed necessary. This is known as a “cram down.” How does it work?

Let’s say you own a car but still have some payments remaining. What you need to do is determine when you actually bought the car. This is important because under chapter 13, auto loan can be reduced. If your car was purchased 910 days or more when you filed for bankruptcy, then you can reduce the remaining balance that you have to pay for the car. Like I said, timing is the key.

Another way that through chapter 13, auto loan can be reduced is when the amount of the loan or the balance has become greater than the actual value of the car. In this instance, you can force your creditor to accept the actual value of the car as full payment.