The answer is usually “YES!”, you can lower a car payment in bankruptcy…but only if you qualify for Chapter 13*, which is a bankruptcy refinancing option.

In a Chapter 13 bankruptcy—that is, a payment plan for consumers—a client may lower their interest rates to the prevailing federal prime rate plus 2%, which at this time is around 5.25%. They may also be able to stretch their payments out, refinancing up to 60 additional months after the bankruptcy is filed.

AN EVEN LOWER CAR PAYMENT is available if the client purchased or financed the vehicle more than 2.5 years before the date Chapter 13 is filed. This option is called the “CRAM DOWN”, which means that the client may also refinance their vehicle (up to 60 additional months) using the retail (Bluebook) market value on the day they file as the new balance to be paid in their bankruptcy, PLUS use the lower interest rate used above.

Do you still have questions about the various types of bankruptcies? Or are you afraid to file bankruptcy? Learn more about Chapter 13 bankruptcy here.

*Clients must qualify for Chapter 13 relief, and their maximum relief depends on their income and expenses as determined by federal bankruptcy law.