How do you "cram down" a upside down auto loan.

[optimistic1]

Ok, so I read about cramming down a auto loan that is owed much more than the car is worth.

How does this work exactly

I owe about $11,000 on the car with about 33 months left, I plan on filing within the next 3-9 months.

The payment is about 367.00, and has always been and is current.

NADA lists the value of the car at about $6700.

Does this process help me or hurt me?

[JillyBean]

It helped us. We were upside down on both of ours. Both our car payments per month were $733 total. And now our trustee payment is $300 per month with both cars being paid inside the plan. It seemed to help us out.

[HHM]

1st, the car loan must be older than 910 days (2 1/2 years), if not, you cannot do a cram down.
2nd, then you simply describe the cram down in your plan and claim part of the debt as secured, and part as unsecured, and provide payment in full of the secured amount within the timeframe of the chapter 13 plan. (the payment would be inside the plan).

[justbroke]

To add to what HHM wrote... some Districts require what HHM wrote in the 2nd point (a Plan which indicates a cramdown), as well as a Motion to Value Security or Motion to Determine Secured Status.

The reason is, some Districts allow certain motions within the Plan, and others require an actual motion.

Of course, your lawyer will know what's applicable for your District.

[optimistic1]

great this sounds like this is for me considering the loan is so upside down, it looks very much like a benefit. thanks for the help once again.

[Flamingo]

We had two vehicles in our Chapter 13, both crammed. Both were 3 years old at the time of filing, both having 5 year loans and both upside down. Now, this was old law (prior to 10/05) but what our attorney did was utilize the blue book value of the vehicles, add some interest to keep the two banks happy, and both went through as secured (no unsecured involved). Again, this was old law so I am uncertain if this practice may have changed as HHM mentioned part of the debt would be listed as unsecured. We received the titles to both a few years into our 5 year Plan since they were paid off prior to the end of our Plan.

[broncho14]

Does the car have to be over 2.5 years old or is it from the time that you own it?Example: I have a 2004 Honda Accord that I bought in January of 2007. I filed in June of 2008. I had the car one year and five months. They let me cram it down. My payment for my Chapter 13 is $900. My payment in my plan to my car is $700 per month until it is paid off. I thought that I could not cram it down but my attorney said yes and the trustee even said it was fine during the 341.

[justbroke]

Does the car have to be over 2.5 years old or is it from the time that you own it?Example: I have a 2004 Honda Accord that I bought in January of 2007. I filed in June of 2008. I had the car one year and five months. They let me cram it down. My payment for my Chapter 13 is $900. My payment in my plan to my car is $700 per month until it is paid off. I thought that I could not cram it down but my attorney said yes and the trustee even said it was fine during the 341.

It's from the time you purchased the car. A refinancing of the debt would make it possible to cramdown the loan to the car's actual value. A cramdown actually changes the secured portion of the claim... it doesn't just spread it over the term of the Plan.

Let me explain.

What you probably did, was not a cramdown, but an implied refinance. You see, when you put a car into the plan, you get to spread the payments over 60 months (based on the current balance).

A vehicle at $900/month, prior to Chapter 13, with 48 months left on the loan, would be $720/month in a new 60 month Chapter 13. The Chapter 13 also allows you to modify the rate of interest (with some limitations based on the Till and other factors).

Now a true cramdown, would take that $43K vehicle (or so) and make it a $25K vehicle (current value). Your payment would then be about $417/month in a 60-month plan. The difference of $18K would be an unsecured claim and paid pro rata like the rest of the unsecured creditors. If you're in a 10% plan, then they'd get $1.8K over 60 months.

Now that is a cramdown.

[broncho14]

I had 3.5 years left and I was paying $260 a month on the car. The car was the only secured property that I have in the plan.

[optimistic1]

justbroke,

could you tell me what my crammed payment would be? 36 and 60 month figure?

Owe - 11000
KBB, NADA, Value. 7000
Original Payment 364
Current on loan

[justbroke]

I had 3.5 years left and I was paying $260 a month on the car. The car was the only secured property that I have in the plan.

Your prior post is confusing then. You wrote that...

My payment in my plan to my car is $700 per month until it is paid off.

Something isn't right.

I don't believe you received a cramdown. What you did was get a free refinance of the loan through the Chapter 13 plan.

[broncho14]

That may be what it is. I owed a little over $9000 on the car when I filed. However, the term used in the 341 by my attorney was cram down and the trustee said that would not be a problem. That is why I am confused is because my attorney used the word cramdown and the trustee said it was ok to do that. Before I filed I was paying $260 a month to the bank. Now that I am in my plan the bank is receiving $700 a month through my plan. If cramdown is not the correct term then is it a free refinance as you stated? My attorney asked the trustee if I would get the title to the car after it was paid off and the lein would be released and the trustee said yes. I am confused because I did not think that I could do that since I had only had the car for about 17 or 18 months. I was under the impression that the car would technically be property of the estate until I had completed my plan. However, my attorney says that I will own the car outright by July or August of the upcoming year. I am no expert in this and I am learning everyday. Please forgive me of my ignorance of some of this stuff. I am learning a lot on this board every single day. The more that I learn the better chance that I have of not being in this position again.

[broncho14]

I just spoke to my attorney and the phone and justbroke you are absolutley correct. He told me that he used the wrong term when he talked to me and that he used the wrong term when he addressed the Trustee. He said that the term cramdown is sometimes used liberally and that the truste knew what he meant when he used it. He explained to me what a cramdown was versus a refinance, which is what we did in my plan. Thank you for your answer. The attorney and trustee understood each other but I did not. I will try to continue to learn as I go through this.

[optimistic1]

to me that still doesnt make sense, how could a "cram down" take your car payment from $260 to $700?

[justbroke]

could you tell me what my crammed payment would be? 36 and 60 month figure?

Owe - 11000
KBB, NADA, Value. 7000
Original Payment 364
Current on loan

First, if you bought the car more than 910 days ago (2.5 years) then

A 36-month plan is $219.35 at 8% interest (Till).

A 60-month plan is $141.93 at 8% interest (Till).

They base it on the $7,000 value. Now, the difference, the $4,000 would be paid as a general unsecured claim. How much you save on this total deal will be based on what percentage you pay to unsecured creditors. Anything less than 100% is, of course, a win for you. If you have a 0% plan... even better.

Otherwise, you'll only get a refinance of the $11,000 so the new payment would be $344.70 for 36 months (at 8%), or $223.04 for 60 months (at 8%)