Using Chapter 13 Bankruptcy to Lower Your Car Payment

Chapter 13 bankruptcy is a form of legal debt relief that can stop automobile repossession and offer you time to reorganize your debt in an effort to pay back your creditors. What many individuals don't realize when they contact a Elk Grove Bankruptcy Lawyer, is that in some cases you can use Chapter 13 bankruptcy to lower your car payment. The process takes some time and organization, but with a strong will to reduce the debt it is possible. Here are the steps involved.

Filing Chapter 13 bankruptcy in California

Chapter 13 bankruptcy in California is often referred to as the "wage earners" bankruptcy in that you can file for this form of legal debt relief even if you have a steady income and are not completely broke. You are eligible to file for Chapter 13 bankruptcy so long as you have less than $394,725 in unsecured debts and less than $1,184,200 in secured debts. The first step is to file your bankruptcy petition with the US Bankruptcy Court in your district. The petition will include all your asset, debt, and income information along with a case filing fee. You should always contact a local bankruptcy attorney for assistance with filing, as only a licensed bankruptcy lawyer is allowed to advise you on how to fill out the bankruptcy petition.

Paying your Auto Loan

Unless your Sacramento bankruptcy attorney advised you otherwise, you should continue making payments on any secured property that you wish to keep such as your automobile. If you want to keep your car and owe money through an auto loan, you must either pay the entire balance in full over time. A chapter 13 plan can help you to lower your payments.


Cramdowns in bankruptcy are an extremely efficient way of lowering car payments for consumers who owe more than the actual fair market value of the car. A cram down is only available in Chapter 13 bankruptcy and works by comparing your loan value and the market value of the car. Your loan balance will be reduced or "crammed down" to match the actual value of the car. The legal reasoning behind this is that the market value of the car is what the loan is "secured" by.

Getting Bankruptcy Help

Using Chapter 13 bankruptcy to lower your car payments isn't easy and requires a good organization of your documents, timing, and the assistance of a California bankruptcy attorney to ensure you do everything legally required. By hiring a bankruptcy lawyer, you'll ensure that you are able to keep your automobile through bankruptcy even if you aren't successful in lowering your payments.

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