As mentioned elsewhere, sometimes it is not only possible to get a brand new car in Chapter 13, it is downright the smart thing to do. But if this not possible, sometimes you can lower your car payments in a Chapter 13 through what is known as a cram-down. A cram-down enables you to pay your creditor the value of your car while eliminating the amount that you are upside down. In other words, it eliminates negative equity. What’s more, the interest you pay on current value of car (i.e. the part you will continue to pay) is usually between 4 and 6%. Consequently, not only do you keep the car, you can significantly lower your payments.
This cannot be done in every case, however. First and foremost, if the car is used for personal use, it must have been purchased 2.5 years ago (910 days). Other indicators of good cram-down candidates include:
- Car purchase with negative equity
- High interest rate
- No money down
- Discontinued model
- Damage to vehicle
Knowing how to cram-down your car is just another way in which an experienced attorney can save you a lot of money…more money that his fees.
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