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The rules of an auto loan cramdown

Virginia residents and those living elsewhere around the country that have negative equity in their vehicles may qualify for loan cramdowns. However, this option is available only to individuals who file for Chapter 13 bankruptcies and meet other requirements. It should also be mentioned that filing for bankruptcy may impact an individual's finances for several years, so the decision to file should not be taken lightly.

In order to cram down a car loan, a person must have owned his or her car for at least 910 days. He or she must also be making payments on the car loan as part of his or her repayment plan. The reason it's possible for someone to reduce what he or she owes on his or her car is because the loan is only secured for the vehicle's current fair market value. Since a car is a depreciating asset, the secured value of a vehicle decreases over time.

In addition to reducing the amount owed on their auto loans, it also may be possible for those who are filing for Chapter 13 bankruptcies to request lower interest rates on their loans. They may also ask their lenders to extend the terms of their loans, which may result in lower monthly payments.

Filing for a Chapter 13 bankruptcy may help someone to protect property or renegotiate the terms of their existing debts. When someone files for bankruptcy, he or she is typically given an automatic stay of creditor collection action. Therefore, a creditor may be more motivated to alter the terms of a car loan or other existing debt that an individual may have at the time of the filing. An attorney may be able to advise his or her clients about the other benefits of a Chapter 13 bankruptcy and who are qualified to make this filing.

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