Free Consultation

Call us right now. Or let us Call You!

(317) 769-2244
Fields marked with an * are required

“Cram Down” of Auto Loans

The “Cram Down” of Auto loans explained by an Indianapolis Chapter 13 Attorney

"Cram Down"

“Cram Down” of Auto Loans -Being an Indianapolis Chapter 13 Bankruptcy Attorney, I have gone through the “cram down” process for auto loans in Chapter 13 bankruptcy very frequently.   This “cram down” provision allows for a debtor to reduce the secured amount that must be repaid for their car or truck down to the current market value of the vehicle.   Let me explain how “cram down” works.

Give Me An Example of a Car Cram Down

If a car is eligible for a cram down, then you will only be required to pay the current market value of the car back to the creditor.   As an example, if your loan for the automobile was for $12,000 but the current market value was for $8,000, you would only have to pay back $8,000 as your secured debt amount.  You could save considerably because you would not have to pay back (at least 100%) almost $4000 (plus whatever interest).   In addition, you will likely only have to repay at an interest rate at about 4.5-5%.

Why and When am I Able to Cram Down an Automobile Loan?

When Congress wrote the Bankruptcy Code, they wanted to treat different “classes” of creditors as fairly and evenly as possible.   Therefore, to address part of this concern, Congress added Section 506 of the Bankruptcy Code.  For automobiles, Section 506 of the bankruptcy allows auto loans that are more than 910 days old (or approximately 2.5 years old) to be “crammed” down to market value.    Because these “older” auto loans can be (in reality) greatly unsecured after 2.5 years, Congress decided that it was fair both to the debtor and other creditors to only pay the secured portion back to the creditor with interest.   The rest of the auto creditor’s claim is then treated the same as all other unsecured creditors are treated within the Chapter 13 plan.

Are There Any Exceptions that MAY Allow a Cram Down Before 910 Have Past?

The “910” rule generally applies to a “purchase money” creditor only who lends to the debtor for a personal use vehicle.  It may be possible in some situations to cram an automobile beforehand if a vehicle has been refinanced by a new lender (or possibly the same lender), the automobile is used for business use, or possibly if the vehicle was purchased for someone else instead of the debtor.   Such situations could be sufficient to surpass the requirements of “purchase money” and “personal use.”  However, it is very likely that your creditor could object in your Chapter 13 case.  If that is the case, you will need to either settle with the creditor or let the judge decide if you can cram your automobile in such a situation.

A Unique Opportunity: Cramming Down Automobiles in Chapter 13

As an Indianapolis Chapter 13 Bankruptcy Attorney, I have seen many success stories play out over the years when our clients have crammed down their automobile loans in a Chapter 13 case.    We have seen budgets that simply do not work.   We have also seen massive balances that will never allow our client to pay off the vehicle before it breaks down.   Situations like this are perfect for the Indiana residents to take advantage of Chapter 13’s cramming provisions.

~Indianapolis Chapter 13 Bankruptcy Attorney John Bymaster

 

 

 

 

 

 

Pre-Bankruptcy Credit Counseling – The Top Five Things to Know

e_learning_0

Pre-Bankruptcy Credit Counseling – Every debtor is now required to take a bankruptcy credit counseling course before they file a Chapter 7 or Chapter 13 bankruptcy case. This pre-bankruptcy credit counseling course can be taken through several different course providers. This article is about the top five things to know about this course.

Number One: The pre-bankruptcy credit counseling course is usually very affordable. The pre-bankruptcy credit counseling course is usually only a cost of $10 to $20 at this time for an affordable and reliable course provider. When the original requirement for the pre-bankruptcy course was put into effect in October 2005, courses usually ranged anywhere from $50-$75. Over time as the course became more clear and more providers got involved, the cost gradually declined until now when the approximate cost is usually $10-$20 per bankruptcy per course provider. If you are paying more than $10-$20 for this pre-bankruptcy course now, you may be paying too much and could possibly find more affordable options.

In certain situations, the pre-bankruptcy credit counseling course can even be obtained for free or reduced charge. This is because the bankruptcy code requires all providers to provide the course either free or at a reduced charge to people who do not have the means financially to take the course.

Number Two: The pre-bankruptcy credit counseling course usually only takes one hour to complete. Unlike other more intensive courses provided for various legal settings, the pre-bankruptcy credit counseling course only takes one hour to complete. You may spend more than one hour working on the course if you choose, but you are required by the federal law to spend at least one hour in completing the course.

Number Three: The pre-bankruptcy credit counseling course goes over alternative options to bankruptcy such as repaying your debts. The content of the pre-bankruptcy credit counseling course is a repayment plan or other method that may be available to repay your debts. This repayment plan (or other viable information that can help you avoid bankruptcy) is not very useful to many people who already thoughtfully have considered whether they should file for bankruptcy. However, in some situations it may be an advantage to the debtor to know that it is their best option to file bankruptcy.

Number Four: The pre-bankruptcy credit counseling course can be taken easily either through the Internet or on the phone.  Because of opposition in Congress, the requirements for taking the pre-bankruptcy credit counseling course are not very difficult. Congress decided that it is necessary to allow people to take the class quickly either through the Internet or through the phone to make it less of a burden for those seeking to file bankruptcy. Therefore, if necessary, it can be very easy to obtain the pre-bankruptcy credit counseling course certificate either by contacting an institution that will do it right away over the phone or by doing it immediately through the Internet.

Number Five: The pre-bankruptcy credit counseling course must be taken before the bankruptcy case is filed. There are absolutely no exceptions except for some very limited situations. It is extremely important to note that all debtors must take the pre-bankruptcy credit counseling course before they file for bankruptcy. Any person who is an individual (such as a person, not a business) must take the course before the bankruptcy case is filed or their case will be shortly dismissed thereafter.

There are only very limited exceptions to those who are not required to take the pre-bankruptcy credit counseling course. The first exception is for incapacity: a person who does not have the mental capacity to take or understand the course. You will be required to provide detailed medical information and file a motion to have the credit counseling requirement waived for incapacity.

A second less common exception is for those in active military service who do not have the ability to take the course. It is advisable that even people on active military duty should still take the course but may be able to avoid if taking the course is absolutely impossible.

Take the pre-bankruptcy credit counseling course. It will not be a burden to you. If you are seriously considering filing bankruptcy, do not let the pre-bankruptcy credit counseling course deter you from filing bankruptcy. The pre-bankruptcy credit counseling course is very easy to complete and very affordable: if you need help taking the course you can contact our office and we will send you to a provider who is reliable and affordable so that you can prepare to file Chapter 7 or Chapter 13 bankruptcy.

-Indianapolis Bankruptcy Attorney John F. Bymaster

BANKRUPTCY JUDGES & FEDERAL POWER

BANKRUPTCY JUDGES: THE “FEDERAL” JUDGES WHO ARE NOT “FEDERAL” JUDGES.

BANKRUPTCY JUDGES & FEDERAL POWER

BANKRUPTCY JUDGES & FEDERAL POWER:  The domain of bankruptcy was allotted to the federal government by the constitution itself where it says, “The Congress shall have Power To…establish…uniform Laws on the subject of Bankruptcies throughout the United States…. .”   This clause eventually led to the creation of the current federal bankruptcy system in 1978.   Federal bankruptcy judges were appointed to the bench in every District throughout the United States.  These federal judges, however, were not given the same power as full “Article III” judges (or the power of a regular federal judge to hear all federal and state matters-at least within the confines of their jurisdiction).

Certainly, a bankruptcy judge can hear ALL matters that pertain to bankruptcy, correct?  The answer to that question would surprisingly be NO at least according to the ruling of the famous Stern v. Marshall bankruptcy case which involved the famous (now deceased) Anna Nicole Smith.  This ruling greatly limited (and confused) federal judges’ ability to try cases that involved any State Court matters.  The jurisdiction of federal bankruptcy judges was limited to any dispute that “stems from the bankruptcy itself.”

Therefore, even if a matter is fully relevant, related, and essential to proper administration of a bankruptcy case, a federal bankruptcy judge may have no jurisdiction or authority over the matter.   If a state or federal court matter exists and it “does not stem from the bankruptcy itself,” the federal bankruptcy judge may have no power to decide on such matters.    Even a consent to jurisdiction for such a matter may not give the bankruptcy judge sufficient authority to decide such a matter.   Well, at least until very recently.

In Wellness International Network vs.  Sharif, the Supreme Court of the United States recently has given bankruptcy judges new authority to make final judgments on bankruptcy disputes that contain state issues.  If the parties consent to the jurisdiction, this new ruling appears to give federal bankruptcy courts full jurisdiction over such matters.   Federal Bankruptcy court can now serve as a useful and all-inclusive venue for deciding complex bankruptcy-related matters in one place.

Although Bankruptcy Judges are still not full “Article III” Federal Judges, the Supreme Court’s new holding greatly increases bankruptcy judges’ power to take care of bankruptcy disputes.   Most parties would naturally assume (or at least prefer) that all disputes related to bankruptcy can be determined in one place: bankruptcy court.   Now, with the consent of parties, it appears that all bankruptcy-related matters can be determined in one place: by the Federal Bankruptcy Judge.

~Indianapolis Bankruptcy Attorney John F. Bymaster