Is it possible to negotiate a car loan settlement in chapter 13 or chapter 7?

[moorman]

i have a car thats included in a chapter 13. it has two liens on it, totalling 6,000 dollars. is it possible, if i got trustee approval, to negotiate a lower payoff amount with the lien holders in the chapter 13 or chapter 7 if i convert it??

[justbroke]

Absolutely. The thing is, that you don't even need to negotiate and it's not a settlement. Depending on which Chapter of bankruptcy, you can either redeem it for current market value, or you can cram down the vehicle to current market value and pay that in a Chapter 7 or Chapter 13, respectively. You would not need Trustee approval. This is a basic function of bankruptcy (Chapter 7 and Chapter 13).

The key in a Chapter 7 is simply the current market value. You would need to "redeem" that car in the Chapter 7 by paying the approved redemption value. IN a Chapter 13, the key will be whether this is a so-called 910-day vehicle. If the vehicle was purchased (using the first loan) within the last 910 days of filing, you can not "cram down" the value to current market value. However, the second loan would certainly not be a "purchase" loan (used to purchase the car), and could be easily stripped in a Chapter 13. The other question in a Chapter 13 would be whether that first loan was a purchase money loan. If it was not, then you could cram the vehicle's value down to market value without any of the special considerations in a Chapter 13 (the 910-day vehicle consideration).

If we knew more about those 2 loans and when you took the loans on the vehicle, we could tell you more.

[moorman]

Absolutely. The thing is, that you don't even need to negotiate and it's not a settlement. Depending on which Chapter of bankruptcy, you can either redeem it for current market value, or you can cram down the vehicle to current market value and pay that in a Chapter 7 or Chapter 13, respectively. You would not need Trustee approval. This is a basic function of bankruptcy (Chapter 7 and Chapter 13).

The key in a Chapter 7 is simply the current market value. You would need to "redeem" that car in the Chapter 7 by paying the approved redemption value. IN a Chapter 13, the key will be whether this is a so-called 910-day vehicle. If the vehicle was purchased (using the first loan) within the last 910 days of filing, you can not "cram down" the value to current market value. However, the second loan would certainly not be a "purchase" loan (used to purchase the car), and could be easily stripped in a Chapter 13. The other question in a Chapter 13 would be whether that first loan was a purchase money loan. If it was not, then you could cram the vehicle's value down to market value without any of the special considerations in a Chapter 13 (the 910-day vehicle consideration).

If we knew more about those 2 loans and when you took the loans on the vehicle, we could tell you more.

i purchased the car in december of 2011 from a private individual. a loan was provided by a finance company. all i know is the loan is like a security agreement with a promissary note built in. its not a bank loan. the balance is 3700 dollars. in may of this year, i needed some work done on the car and got a title loan for 2000 dollars on the vehicle. the interest rates have been crammed down, but not the loan balances. ( im in chapter 13). the state is georgia.

[justbroke]

i purchased the car in december of 2011 from a private individual. a loan was provided by a finance company. all i know is the loan is like a security agreement with a promissary note built in. its not a bank loan. the balance is 3700 dollars. in may of this year, i needed some work done on the car and got a title loan for 2000 dollars on the vehicle. the interest rates have been crammed down, but not the loan balances. ( im in chapter 13). the state is georgia.

Okay, so you are already in a Chapter 13. The reason the vehicle loan balance was not crammed down was either a.) the value of the vehicle was more than the loan balances and/or b.) it was actually a 910-vehicle (used a loan as "purchase" money within 910 days of filing.

You can not renegotiate at this point. You had a 910-vehicle. If you think one of the lenders would lower your balance, then you could do that outside the bankruptcy and then file a Motion to Modify Confirmed Plan, but at this point, the vehicles value was set on the day of your Chapter 13 confirmation.

If you do convert to a Chapter 7, then you could, as I listed in the prior message, redeem the vehicle for the current market value as of the day of the conversion (or the hearing on the redemption).

[moorman]

Okay, so you are already in a Chapter 13. The reason the vehicle loan balance was not crammed down was either a.) the value of the vehicle was more than the loan balances and/or b.) it was actually a 910-vehicle (used a loan as "purchase" money within 910 days of filing.

You can not renegotiate at this point. You had a 910-vehicle. If you think one of the lenders would lower your balance, then you could do that outside the bankruptcy and then file a Motion to Modify Confirmed Plan, but at this point, the vehicles value was set on the day of your Chapter 13 confirmation.

If you do convert to a Chapter 7, then you could, as I listed in the prior message, redeem the vehicle for the current market value as of the day of the conversion (or the hearing on the redemption).

ok. so, you are saying that if i convert to a chapter 7, they would HAVE to accept the market value of the vehicle if i redeemed it if its lower than what i owe them? if so, i wonder how that would play out since i have two lienholders on the vehicle??

[justbroke]

ok. so, you are saying that if i convert to a chapter 7, they would HAVE to accept the market value of the vehicle if i redeemed it if its lower than what i owe them? if so, i wonder how that would play out since i have two lienholders on the vehicle??

Not quite. What I'm saying is that if you should convert to a Chapter 7, you would need to Redeem the vehicle. You can only Redeem the vehicle by filing a Motion to Redeem and present evidence of the value. The judge would approve the value at a hearing on the Motion to Redeem. (If you are lucky, as I was, the lender could file a joint stipulation as to the value and there would be no hearing.)

It does not matter how many lienholders are on the vehicle. A lien on a motor vehicle is no different than a lien on any other property. The lien holders have a certain "place" or position as to their respective security agreements. If you are the first lienholder, you are paid first; likewise, if you are second, you would be second in line to be paid. If the redemption value is less than what you owe the first lienholder, then the second lienholder would receive no money. The balance of the debt, for both the first and subsequent lienholders, would be discharged by the bankruptcy.

As part of your Motion to Redeem, you must also show how you would pay the redemption value (current/fair market value). That payment would need to come from exempt funds or you would need to find financing. You would only have until the discharge date (or shortly after the discharge date) to payoff the lineholder(s).