Reducing Payments on Car Note Through Bankruptcy
If your car is currently worth less than the amount that you owe on it, you may be able to lower the amount of the loan through your bankruptcy filing. This process is called a Cram Down.
A Cram Down essentially reduces the amount that you owe on your vehicle to the value of the vehicle. Because cars tend to depreciate the moment they are driven off the lot, people are usually paying more than the value of the car to the lender, especially if the car was new. In a Chapter 13, you can use a Cram Down to pay what your car is actually worth.
Generally, Cram Downs are only available to debtors who bought their car more than 910 days (roughly 2.5 years) prior to filing bankruptcy. However, even if you bought your car less than 910 days ago, you may still be able to renegotiate a lower interest rate on your loan through your bankruptcy lawyer.