Debtor Can Cram Down Loan For Wife's Car Purchased Within 910 Days of Filing Chapter 13.

Here's a blog post of interest to anyone considering a Chapter 13 bankruptcy and who owns a car subject to a car lien. South Carolina Bankruptcy Lawyer Unleashes Vulcan Intellect on Hanging Paragraph. The post authored by South Carolina bankruptcy attorney Russell DeMott explains the law pertaining to the treatment of car loans in Chapter 13. If you purchased a car more than  910 days before filing Chapter 13 you can cram down the secured portion of the car loan to the car's current value. The balance of the car loan, the "upside down" amount, is treated just like an unsecured credit car. Part of the unsecured car loan amount may be discharged in a Chapter 13.

There is an exception to the rule. The rule prohibing cram downs of car loan made within 910 days of filing only applied to cars purchased for your personal use. Mr. DeMott's blog post explains a case where a husband purchased a car for his wife within the 910 days. The debtor husband, not the wife, signed the car loan. The husband and wife filed a joint Chapter 13. The judge ruled that the joint Chapter 13 plan could cram down the car loan even though it was taken out within 910 days of the bankruptcy.

The post quotes part of the bankruptcy attorney's argument:

““while section 302 permits the filing of a joint case, if the court were to find that the hanging paragraph applied to  Mr. Brown’s purchase of the vehicle, it would result in the Browns being penalized for filing a joint case.”

Read the post for a full explanation. If you are filing Chapter 13 with a car purchased within 910 days make sure you consider whether the car was purchased for the personal use of the debtor who signed the car loan. Cars purchased for children, for business use, for your spouse may be outside the cram down restrictions.

 

posted by Jonathan Alper, banrkuptcy and asset protection attorney, Orlando, Florida

Comments

[Russ DeMott]

Jonathan, Thanks for mentioning my post on BLN. Nice blog. I will subscribe.