"Cramming Down your Auto Loan" How to Lower Your Interest Rate and Increase the Amount of time to Pay Off your Car!

How to lower the interest rate on your auto loan.  How to increase the amount of time to pay off your auto loan.  How to lower your payments.  It's all a part of filing a Chapter 13 Bankruptcy and properly modifying your loan in the bankruptcy plan.

Here's how it works:

If your car was purchased more the 910 days in the past and the current loan was used to purchase it...oftentimes referred to as a "purchase money loan" you are allowed to both reduce the total loan balance to the appraised value of the car on the date of filing your bankruptcy  PLUS you can also reduce the Interest rate the Till rate.  The Till rate is :

PRIME RATE (Click Here for Today's Prime Rate)  +  RISK FACTOR  (1-3%)

TILL v. SCS CREDIT CORPORATION, 124 S. Ct. 1951, 158 L. Ed. 2d 787, 541 U.S. 465 (S.Ct., 2004)
To Read More about Till Case, Click the Attached link: 
TILL v. SCS CREDIT CORPORATION

Example:

Jeff's 2002 Mitsubishi Galant is worth $2400.00.  Jeff's automobile loan is with Wells Fargo.  The loan balance at the time of filing his Chapter 13 bankruptcy was $5500.00.  The interest rate on this his loan was 22%.  He had 24 payments left on his loan.  Jeff's attorney modified the loan as follows in his bankruptcy plan:

Balance to pay off:  $2400.00   (This is the current appraised value of the auto)
Interest Rate of  Loan:  6.25%      (Current Prime Rate of 3.25% plus maximum risk factor of 3% from the Till case.)

What is my auto loan is only 30 days old?

No problem, you can still modify the interest rate down to the Till rate  of Prime Rate + Risk Factor BUT YOU CANNOT reduce the loan balance amount.


In this example, Jeff's 2002 Mitsubishi Galant is still worth $2400.00.  Jeff's automobile loan is still with Wells Fargo.  But the loan is only 30 days old and the balance is $5500.00.  The interest rate is 22%.  Jeff still has only 24 payments to go, but the loan is only 30 days old.  In this case:

Balance to pay off stays at $5500.00
Interest Rate of the Loan goes to:  6.25% (Current Prime Rate of 3.25% plus maximum risk factor of 3% from the Till case).

Summary:

Chapter 13 Bankruptcy offers the ability to modify an automobile loan by either reducing the interest rate to Prime Rate Plus a Risk Factor or both reducing the interest rate AND reducing the loan payoff amount to the appraised value of the automobile depending on whether the auto loan is 910 days or older.  The Till case is a watershed case that has been followed for years in providing for this treatment of the interest rate.  However, the Bankruptcy Act of 2005 added the 910 day rule.


For more information about Chapter 13 Bankruptcy in Illinois, please call NLO Nelson Law Office at 877-GO-GO-NLO (877-464-6656) or email NLO Nelson Law Office Information