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Vehicle Loans Prior to Bankruptcy

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  • 12-30-2011, 09:21 PM
    alkasalsa
    Vehicle Loans Prior to Bankruptcy
    My question involves bankruptcy in the state of: Wisconsin

    It's my understanding, that vehicle loan interest rates are lowered to prime plus about 1.5% before going into a chapter 13. Doesn't matter if you only had the loan for 4 months prior. This is to ensure creditors get more money. Is that accurate?
  • 12-30-2011, 10:07 PM
    Disagreeable
    Re: Vehicle Loans Prior to Bankruptcy
    If you are declaring bankruptcy, I would reconsider some of the fraudulent tax dodges you appear to be considering. You will be on the governments radar.
  • 12-31-2011, 04:26 AM
    jk
    Re: Vehicle Loans Prior to Bankruptcy
    there is no requirement the interest be altered prior to filing a bankruptcy action.
  • 12-31-2011, 05:08 AM
    davidmcbeth3
    Re: Vehicle Loans Prior to Bankruptcy
    Quote:

    Quoting jk
    View Post
    there is no requirement the interest be altered prior to filing a bankruptcy action.

    Seems to make no sense ... how would they even know he was really going to file. Or is this an banking industry-standard thing to see if they can avoid repo-ing a bad asset? I'm curious on this one...
  • 12-31-2011, 06:08 AM
    alkasalsa
    Re: Vehicle Loans Prior to Bankruptcy
    I was told by a couple attorneys, that the trustee reduces the interest rate on the vehicle loans in a chapter 13. Not sure if that is state specific, or not. This is so the creditors get more money. Now you might ask.. If I was told that why am I asking? Well it seems it's very hard to get the same answer from multiple attorneys, as I've had 6 consults and different answers on many issues.

    Maybe I wasn't clear on the before bankruptcy...

    My understanding is when you take out a auto loan, say 4 months prior to filing a 13. You will get whatever rate the loan company wants to give you. So say you get a 10% rate. The trustee I believe will lower to about 1.5% over prime rate. Supposedly to give more money to the creditors.
  • 12-31-2011, 06:14 AM
    jk
    Re: Vehicle Loans Prior to Bankruptcy
    then your question wouldn't be concerning prior to filing for a BK but what actions a trustee can take within a BK. Obviously a huge difference.
  • 12-31-2011, 07:19 AM
    despritfreya
    Re: Vehicle Loans Prior to Bankruptcy
    Salsa,

    I apologize for posting here but this is one of the sites I frequent and I saw some additional info that I did not know (or forgot). . .

    The "risk factor" I wrote about does take into consideration the timing. If the vehicle was purchased only 4 months prior to filing the risk factor could include "bad faith". You may, and I stress the word "may", have a tough time reducing the rate to some factor above prime. The fact that the vehicle purchase is so soon before the bk can have an impact on whether or not the creditor files an objection. No harm in trying the cram down on the interest rate. If an objection is filed you can negotiate a settlement, much like I mentioned in my PM.

    And. . . It is not the Trustee who sets the rate (unless there is some local rule - but I doubt it). It is "you" by the terms of the Chapter 13 Plan you propose to the Court, the trustee and the creditors.

    Des.
  • 12-31-2011, 02:02 PM
    alkasalsa
    Re: Vehicle Loans Prior to Bankruptcy
    Thanks for the clarification. I ended getting a loan payment slightly over the $496.00, at the 11.5% interest rate. I guess it doesn't really matter to me if the rate is lowered or not. It either goes to the bank where I bought the car, or to the trustee for the creditors.

    At least in our area, sounds like it's common practice to push down the interest rate. We will see what happens. We have one more vehicle to buy yet, and I'll make sure I get additional clarification prior to that one.
  • 12-31-2011, 04:20 PM
    Mr. Knowitall
    Re: Vehicle Loans Prior to Bankruptcy
    It's quite possible for the interest rate to be reduced in the course of a Chapter 13 bankruptcy.

    But if you buy a car you can't afford and trot into bankruptcy court asking the trustee to both cut your interest rate and give you an expanded allowance for the vehicle because you can't afford to operate it, I think you're shooting yourself in the foot on that latter request. And if you're stacking up cars like cord wood, saying "But my kid drives our third car" isn't likely to get you anywhere when the trustee asks why you're not getting rid of the car you can't afford.
  • 12-31-2011, 06:20 PM
    jk
    Re: Vehicle Loans Prior to Bankruptcy
    Holy cow. I guess I should read posting history.


    You do realize that purchasing a bunch of things on credit immediately prior to filing bankruptcy can be seriously problematic, right?
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