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Title Loans in Bankruptcy

Do you have a title loan on your vehicle that has an extremely high interest rate with unaffordable monthly payments?

If so, chapter 13 bankruptcy can help. Chapter 13 is a debt restructuring repayment plan that helps with title loans in a number of different ways.

First, you can reduce the interest rate on the title loan to around 6%. The bankruptcy laws allow you to override the contractual interest rate and instead use a more reasonable “statutory” rate, which is currently around 6%. That alone can help you save thousands of dollars in interest on your title loan. But it gets better…

You can also “cram down” the title loan. This concept is best illustrated by an example. Suppose you owe $6,000 on your title loan but your car is only worth $2,000. In this scenario, you only have to pay the title lender $2,000 (at a 6% interest rate as described above) instead of $6,000.

In chapter 13, you only have to pay the title lender what the collateral is worth ($2,000) instead of the total amount of the loan ($6,000). Therefore, chapter 13 is a great way to shave off all of the excess financing, saving you thousands.   

In addition, chapter 13 allows you to reduce the monthly payments by extending the length of the loan. Title loans usually have short repayment periods (usually between 12-24 months) but chapter 13 allows you to extend the repayment period to up to 60 months (although it can be shorter if you choose).  This helps to drastically reduce the monthly payment on the loan.

Again, suppose you have a $6,000 title loan, and your car is only worth $2000, and the monthly payment is $500. In this scenario, you can pay the title lender $2,000 over 60 months at 6% – and your monthly payment will be around $45/month.

Chapter 13 also can help if a title lender has repossessed your car. Chapter 13 forces them to return your car and allow you to make payments on the loan over the course of the chapter 13 repayment plan.

So as you can see, chapter 13 is a great way to get relief from predatory title lenders. We offer no money down chapter 13 bankruptcy services, so if you are having trouble with a title loan, call or email us today.

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