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How we can help families come out ahead on a car loan

Last week's post reported that more people nationwide, including those in the vicinity of Livonia and throughout the Detroit metro area, are incurring additional consumer debt, particular with respect to car loans and student loans. While applying for bankruptcy might not be able to give any direct relief for a student loan obligation, last week's post also suggested that the balance on some car loans may be able to be reduced.

This would normally require the filing of a Chapter 13 bankruptcy, simply because people in a Chapter 7 would usually need thousands of dollars up front to make this procedure work. The idea is that for cars purchased before a certain cutoff date can be paid off at their value as of the day of the bankruptcy filing. For example, if a person owes $10,000 on a car that is now only worth $5,000, the debtor can file a Chapter 13 and agree to pay back $5,000, the value of the car, over time.

Since cars often depreciate much more quickly than a person can pay off the car loan, this procedure can, in theory, save a person bundles of money. However, the facts of each person's case determine whether this approach would work or not. It is a somewhat complicated practice to execute legally, and, needless to say, creditors holding on to a car debt will likely fight it if given the opportunity.

Moreover, it takes a lot of legal skill and know-how to apply for bankruptcy under Chapter 13. It can be very easy for a person to lose his or her way in the paperwork and court processes. Our law offices can help; we have experience in both Chapter 7 and Chapter 13 bankruptcies and can help those who are struggling under a mountain of debt get a fresh financial start. For more information, please visit our Chapter 13 webpage.

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