Reduce interest rate on car loan??

[Anne2012]

We are about to file chap 13 but our atty suggested we buy a new car before filing. The rate is 18%, we will sign the papers for the car shortly before filing. Will the Trustee lower the rate? How and why? I've read bits on here on that happening, but I do not understand the process.

[justbroke]

In a Chapter 13, the rate will be lowered to what's known as the Till rate. It is typically 3.5-5.5% these days with an average amount of 4.5%. (Some States actually set the Till rate quarterly.) It is not the Trustee who lowers the rate. Your attorney does this in the Plan. The loan would also be reset (refinanced) to 60 months.

[SMinGA2]

My understanding of why they do this: a secured loan must be repaid if you keep the property, and that lender is entitled to some interest. But in a ch. 13 it can be set at what's considered a reasonable rate in your state - so that your unsecured creditors are not losing out just so your car lender can collect a high rate.

[karm43]

I got my rate lowered 5 and a quarter you have to ask cause they don't tell you. Only good thing about my chap 13 . It big saving!!!!

[Anne2012]

Thanks for all of the help everyone!

Karm43, who do I ask?

[despritfreya]

Sorry, but despite the posts above the rate probably will not be lowered. Your attny can and most likely will propose a lower rate in the Plan but since you purchased the vehicle "on the eve of bk" trying to screw the lender will most likely result in the filing of an objection to the Plan based upon bad faith. If such happens either you will or you will not be able to settle for a lower interest rate. If it goes before the Judge I am 99% sure the Judge will not be on your side.

Des.

[bcohen]

Sorry, but despite the posts above the rate probably will not be lowered. Your attny can and most likely will propose a lower rate in the Plan but since you purchased the vehicle "on the eve of bk" trying to screw the lender will most likely result in the filing of an objection to the Plan based upon bad faith. If such happens either you will or you will not be able to settle for a lower interest rate. If it goes before the Judge I am 99% sure the Judge will not be on your side.

Des.

And that is when your attorney calls the lender's bluff: take what we're offering, or we'll surrender the car, and any deficiency will be discharged (or paid back at some partial percentage).

[justbroke]

Des, the timing doesn't seem to be an issue in Florida. I can see, though, how a creditor could petition the court and ask that the Plan not be confirmed with the Till rate.

[despritfreya]

Des, the timing doesn't seem to be an issue in Florida. I can see, though, how a creditor could petition the court and ask that the Plan not be confirmed with the Till rate.

Only time will tell for OP. Don't forget. . . Till requires prime plus a factor for risk. I think an argument could be made that due to the timing (bad faith issues and all) a risk factor substantially higher than the norm could be the outcome. Probably less than 18% but when you factor in the Trustee’s percentage it may actually cost the debtor more. I use to see these kinds of issues on a regular basis when we could cram down the value. Don't see it too often now. However, I can tell you that the bluff BC mentions above does not always work. Just depends upon whether or not the lender wants to get back the collateral and unload it quickly vs. having to deal with a debtor in bk.

Des.

[justbroke]

I agree that bluffing could be useless when it's a relatively new car. The lender could just cut their losses. I can clearly see a creditor arguing that the recent purchase justifies a higher rate. Hopefully you'd have a reasonable Judge or a good persuasive argument.

[karm43]

I bought my car 6 months before I filed he went for 5 percent they wanted 5 and a quarter. Was a big saving bought it so it would last the 5 years. Hopefully they will lower cause 18 percent is really high heck anything lower would be better.

[karm43]

Oh Des right what we save a month goes to our creditors I think I did take 2 years off loan too. Well i needed the car so i was paying either way.