When filing a bankruptcy in Michigan, many individuals try to add as many of their unsecured debts as possible. This can include a car loan to where they owe more than the fair market value of the car. This is often done through a car loan cramdown. Here’s more information about how this works and its benefits.
What it entails
A car loan cramdown involves the amount that the individual owes on their vehicle that’s over fair market value. If they receive approval for a cramdown, this amount gets added to their bankruptcy as part of their unsecured debt. For example, if someone owes $20,000 on their vehicle but it’s only worth $15,000, they would end up only owing the lender $15,000 as the other $5,000 would get included in the Chapter 13 bankruptcy.
The benefits of it
Getting approved for a car loan cramdown isn’t easy, but there are quite a few benefits of it. Many individuals do find that they can lower their interest rate or extend the term on their car loan. This allows them to lower their monthly car payment to an amount that they may find more affordable. For those that want to keep their car during bankruptcy but struggle with making the payments on it, a cramdown is a good option.
If you want to file bankruptcy and are wondering if a car loan cramdown is in your best interests, you may want to seek legal counsel. This process isn’t easy, but it can give you some of the financial relief that you are looking for right now.