Is interest rate reduced when car loan is paid in ch 13 plan?

[lookin4info]

Will be filing CH 13 in about a month. We will be including a car loan, current pmnt $375 and have paid for about a year. I am understanding that the plan will now make the pmnts and spread it out over 60 months, but I thought I saw somewhere that the interest rate would be reduced, but couldn't find it in the search. Can anyone explain how this works? Thanks so much!

[Pandora]

Sometimes if you have a high interest rate, your attorney can request the rate be brought down to what current rates are. If your rate is in the 6-8% range, they may just leave it as is.

Is it mandatory to include all secured creditors in your plan? Are you behind in payments? Be aware that paying inside the plan will result in the trustee getting paid to make that payment vs. you making it.

[dh7448]

Mine went from 9.6% down to 6% on my loan. Paid inside the plan.

[NowImDownInIt]

Mine went from 18% to 7%, it varies with the individual though.

[LadyInTheRed]

My rate actually went up from 1.9% to 6%!

[Pandora]

My rate actually went up from 1.9% to 6%!

why on earth would they raise it? That makes no sense at all....

[johnjan2009]

In my case, they cramdown car value to whatever is in blue book and divided that by 60mos and that will be my payment under the plan... pretty much no interest..

[FishersMike]

I was under the impression they needed to include a Till Rate which is normally 3-6 percent.....

[Nicollette]

Before surrendering the vehicle that was included in my plan, my interest rate went from 21% down to 8%.

[jcj112562]

Generally, they will insist that at least the secured portion of the loan (in a cramdown) get the till rate, while the rest goes into the happy 0% unsecured pile. I am unsure about what they do if it does not qualify for a cramdown, but I would make the reasonable assumption that they will apply at least the till rate to it, if it is 100% secured. It *is* mandatory to include all creditors in the plan, however, one may or may not be able to pay things yourself, and not have the trustee do so. It appears to be something that varies by district and trustee. My auto loan had to be trustee paid, but my mortgage did not, thus saving a good deal of cash in trustee payments.

John

[LadyInTheRed]

why on earth would they raise it? That makes no sense at all....

Well, it kind of makes sense that if you can reduce a high rate to the Till rate that you should also increase a low rate to the Till rate. But, I don't really know if that is the reason, especially since my loan wasn't crammed down. My plan first had it at 7%, but when I questioned it, my attorney lowered it to 6%. I didn't push the issue because I realized in the middle of the conversation that if it didn't go to the car lender, it would go to my unsecured creditors. So, I decided it wasn't worth discussing.

[tammygirl1]

Well, it kind of makes sense that if you can reduce a high rate to the Till rate that you should also increase a low rate to the Till rate. But, I don't really know if that is the reason, especially since my loan wasn't crammed down. My plan first had it at 7%, but when I questioned it, my attorney lowered it to 6%. I didn't push the issue because I realized in the middle of the conversation that if it didn't go to the car lender, it would go to my unsecured creditors. So, I decided it wasn't worth discussing.

LadyInTheRed, mine stayed at 2.9%...strange.

[IM2Stressed]

If you include the car payment in the plan the effective interest rate will likely go up because you pay the trustee a percentage of the debt you have in the plan.

[Pandora]

Well, it kind of makes sense that if you can reduce a high rate to the Till rate that you should also increase a low rate to the Till rate. But, I don't really know if that is the reason, especially since my loan wasn't crammed down. My plan first had it at 7%, but when I questioned it, my attorney lowered it to 6%. I didn't push the issue because I realized in the middle of the conversation that if it didn't go to the car lender, it would go to my unsecured creditors. So, I decided it wasn't worth discussing.

Well that just chaps my backside to no avail - I think it's wrong to increase an interest rate to the Till rate... you're paying more to the lender than what you agreed to on top of what the trustee is taking. I can understand lowering an interest rate to Till, but to increase it? I just dont understand the lawyer's reasoning behind it. I'm glad you got to keep the car but sorry you have to pay more in interest - that stinks.

[LadyInTheRed]

Well that just chaps my backside to no avail - I think it's wrong to increase an interest rate to the Till rate... you're paying more to the lender than what you agreed to on top of what the trustee is taking. I can understand lowering an interest rate to Till, but to increase it? I just dont understand the lawyer's reasoning behind it. I'm glad you got to keep the car but sorry you have to pay more in interest - that stinks.

I appreciate the sentiment, but it doesn't matter to me whether the money goes to a secured creditor or an unsecured creditor. I don't know the lawyer's reasoning because I didn't push the issue once it occurred to me that it makes no difference to my plan payment. My lawyer came up with a plan that gives me breathing room and got easily confirmed. So, I'm very happy. Or, at least as happy as somebody in a 60 month Chap 13 can be. For others, the higher interest rate on a secured debt could increase their payment. If that were true in my case, you can bet I'd completely understand the reason or would still be paying 1.9%.