Times were tough and you needed some extra cash. You saw an advertisement on TV for a Title Loan: No Credit Check! No Job Required! Up to $10,000 cash today! It was either pay the rent or get evicted, so you took your car down to the title loan store, got a few thousand dollars and the title loan company placed a lien on your car. Although you may have just saved yourself from eviction (or whatever crisis you were facing), the problem now is that you are likely going to lose your car. The interest rates charged by title loan companies, calculated on an annual basis, are shockingly high: more than 100% annual interest or higher. Unless you can pay back the full amount of the loan very quickly, you will lose this car to repossession. As the interest and penalties add up, saving the car becomes impossible.
But you need that car to get to work! What can you do? Well, there is a way to save your car using bankruptcy and make repayment of the debt much more manageable. This can be done using a Chapter 13 bankruptcy and filing a motion to “cram down” the title loan (called a motion to value collateral). First of all, filing a Chapter 13 bankruptcy will immediately stop any pending repossession of the car. Then, you can reduce the amount of the loan that you must pay back (the secured portion) to the value of the car. The repayment of the unsecured portion of the car does not have to be made in full, pennies on the dollar is possible. For example, if your car is worth $2,000 in its current condition, and you took out a title loan for $5,000, then you would only be required to pay back $2,000. Then, the $2,000 you do still owe can be paid back over 60 months. Also, the interest rate can be reduced from over 100% down to three to five percent. Not only have you saved your car from repossession, you’ve also gotten a better deal.
Normally, under the bankruptcy laws, car loans can only be “crammed down” where the car loan was made over 910 days before the bankruptcy case was filed. However, because a title loan was not used to actually purchase the car (it is not a “purchase money” loan), this rule does not apply. So, even if you took out the title loan just a month before you filed your bankruptcy case, it can still be “crammed down.”
If you have taken out a title loan and have realized you are unable to pay it back, please contact Laura Margulies & Associates, LLC today for a consultation. The attorneys at the law firm of Laura Margulies & Associates, LLC have assisted thousands of clients through the bankruptcy process. Please call us for a consultation today. To learn more about our firm visit our web site at www.law-margulies.com.