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I Can’t Figure Out My Chapter 13 Bankruptcy Payments – Helpless

Helpless

“Dear Steve,

Brought 3 cars in 2 weeks in 2007. married truck driver. Job closed 1 year 2 months ago. New job less than half the income. 5 kids. parents took over 1 of the cars and the payment. bad credit.

My wife and I went to a lawyer to file chapter 13. Altogether we pay about $1300 in car payments a month. In the plan we will pay $1100 a month. The interest rate will go down to 4.7 % for 5 years.

I only have about 2 or 3 years left on my auto loans. How could this be right that is the only secured debt i owe? It seams to be more money than my high interest loans. Do you have any help to offer me please I don’t know what to do!

Helpless”

Dear Helpless,

Honestly, I don’t know. Let’s see if we can’t get some bankruptcy attorneys to comment on this situation. A good place to start is to not be shy about asking your bankruptcy attorney for an explanation.

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About the author

Steve Rhode

Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.

3 Comments

  • It is difficult to understand the situation without knowing more facts about the case and because Chapter 13 procedures vary by distract. However, I will offer a few observations of what may be going on.

    When a debtor files for Chapter 13, then propose a repayment plan to the court. In some cases, secured debts like house payments are paid outside the plan. In other cases, the debts might be paid through the plan.

    Where I practice, Chapter 13 plans are often used to “cramdown” car loans under certain circumstance. A cram down is a court-ordered reduction of the secured balance due and allows the debtor to pay the lender the value of the vehicle instead of the full balance.

    In a cram down, the bankruptcy court splits the outstanding mortgage balance into two parts. The amount of debt equal to the current appraised value of the home is treated as a secured claim, which the debtor pays through the Chapter 13 plan. The remaining car loan debt is treated as unsecured. Upon completion of the plan, the debtor owns the vehicle and the remaining debt is discharged.

    When using Chapter 13 for a cram down, the vehicle payments are often made through the plan rather than directly to the lender. This helps the trustee administer the plan and gives the debtor more protection if the lender refuses to release the lien upon completion of the plan payments.

    Without more information, I can only speculate about your situation. Mr. Jackson’s suggestion to speak with your attorney for a more detailed explanation is well taken.

    Carl H. Starrett IIs last blog post..A Creditor Objected to My Discharge…Now What?

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