How is my car payment dealt with in a Chapter 13 bankruptcy?
Payment for car loans, with some very limited exceptions, are made through the plan payment made to the Chapter 13 trustee. Chapter 13 bankruptcy offers some very distinct advantages over Chapter 7 bankruptcy in regard to automobile payments. In a Chapter 13 bankruptcy, a car loan can be “crammed down” and “stretched out.” These methods are used when the collateral is worth less than the amount of the debt or when the number of payments left on the debt is less than the length of the plan. The following examples illustrate the cram down and stretch out methods: • Cram Down Method Suppose that the value of your automobile is $10,000 but you owe $16,000 on it. In Chapter 13 bankruptcy, you have the ability to cram down the secured portion of the amount owed to the value of the collateral (in this case, $10,000) and pay the balance owed, if at all, as unsecured debt. • Stretch Out Method Suppose that you owe $5,000 on an automobile at regular monthly payments of $350.00 per month. In Chap
