How would you feel if someone told you that your car payments could be lowered by a significant amount? You’d probably say: “Get real, why would any car lender allow you to do that?” Guess what, if you let an experienced bankruptcy attorney help you file a Chapter 13 bankruptcy, your car lender will, at the least, be force to take the rest of the money owed over a 3-5 year period. Take this example:
John has a 2009 Pontiac G6 that he purchased last year. He is current on his monthly payments, but other financial struggles have made Chapter 13 bankruptcy a good choice to reorganize his finances. To purchase the $25,000 car, he had to finance it through a lender at an interest rate of 10% over a period of 5 years. Under the terms of this finance agreement, John’s monthly payment will be around $570 per month. At this point, John has made timely payments for more than a year; thus, his balance on his car loan is down to $21,000.00. Because his case is a “910 car”, or a car purchased within 910 days of filing bankruptcy, John’s attorney cannot actually lower the amount to be paid to the lender by modifying the principal amount. However, a bankruptcy attorney will be able to file a Plan in which John pays back the remaining balance over an additional 5 year period. Thus, instead of paying back $22,000 plus 10% interest over a 3.5 year period at $570 per month, he will now be paying back $22,000 at a significantly reduced interest rate over a 5-year period at $410 per month.
As an Alpharetta Bankruptcy Attorney, I routinely help debtors from the metro Atlanta area file Chapter 13 bankruptcy to reorganize their finances, lower their car payments, and discharge any remaining unsecured debt. By lowering their car payments, debtors can free up some disposable income to be able to afford a feasible Chapter 13 Plan.