Florida Chapter 13 cases often come with questions about car loans. My clients frequently own or are financing an automobile, and are worried about losing their car when they file a Chapter 13 case.
The good news is that when you file for Chapter 13 bankruptcy in Florida, there may be a way to get relief from car loans with high payments, high interest, or loan amounts that are greater than the value of the car.
If you are paying a high interest rate on your car loan or have payments that are too high to be affordable, a Chapter 13 may help you lower the interest rate or payments.
Many people are paying more than 6% for their car loans. In Chapter 13 cases filed in Florida, it is fairly routine for a lender to accept 6%, or potentially a lower interest rate, through the Chapter 13 plan.
The shorthand we lawyers use is called the Till Rate, which is named after a 2004 court case decided by the U.S. Supreme Court called (what else?) Till v. SCS Credit Corp.
There are some limitations on your ability to use a Till Rate, but if we can do it then it may allow you to reduce your car loan rate – and thereby lower the monthly payment amount.
Let’s take an example of how the Till Rate may work for you. Let’s say you’re paying $500 per month for your Toyota SUV. The loan has 36 months left on it, and your interest rate is 10%. When you file for Chapter 13 bankruptcy I may be able to reduce that amount to 6%, or less; you’d pay the balance of the loan through your Plan, which would reduce the monthly payment and possibly provide some relief.
One potential pitfall with this scenario is that you must complete your bankruptcy case. If your case is dismissed or fails, the deal is off and you’ll be back to your old 10% rate.
So the good news is that Chapter 13 may be able to help you take some of the burden off by lowering the payments and/or interest rate on your car loan. The bad news is that this requires a real commitment on your part, one that involves hard work and paying attention not only to your monthly Plan payments but also to your overall financial health.
Many of my clients tell me that it’s a terrific feeling to drive a car knowing it’s paid in full. The experience of a debt-free life is a powerful one, allowing them to take care of their families and provide for their future in a way not otherwise possible.
When you’re ready, it’s worth it.
Call 407-749-0080 for a free consultation to see how I may be able to help you.