The traditional thought is that a bankruptcy wipes out all debt. Though this may be true, it does not come without a lot of negotiating and financial juggling. The essential truth is that a lender is not going to simply roll over and allow the bankruptcy to occur. Lenders have a few options on the table, and bankruptcy lawyers can toy around with these options to maneuver the bankruptcy to benefit the client. One of the most intriguing ways to do this is with reducing the loan to value ratio on a car purchase. With the help of a bankruptcy lawyer, you can Reduce car loan to value.
How it Works
The client owes money on their vehicle. The amount they owe is far higher than what the vehicle is worth. If the lawyer pushes for it, the client can receive a loan renegotiation of terms. Many professionals call this a loan cramdown. The loan must fit a few stipulations. The loan must have occurred over two and a half years before the filing of the bankruptcy. This is to lead consumers from purchasing a vehicle and claiming a bankruptcy shortly after. Many car owners know that the value of their car drops dramatically within the first six months to a year.
Loan Moves to Market Value
The lenders will assess the current fair market value of the vehicle. The loan will then be moved to that fair market value. It is a number usually presented by the lender though lawyers have some say in the final appraisal of market value. The interest rate is less specific. Some lenders may add a premium interest to the new loan, where others will lower the interest to a prime rate, depending on many variables. With the help of a bankruptcy lawyer, you can Reduce car loan to value. Regardless, the loan itself is finalized at market value. It could be a huge game changer for someone looking at bankruptcy, and it may allow them to place emphasis on the home and other debts. The overall loan to value is reduced dramatically, and the lenders still get a reasonable amount for their initial loan.