Car loan cramdown · Beverly Hills
Car Loan Cramdown and the 910-Day Rule
A car loan cramdown in Chapter 13 lowers the secured balance to what the car is worth, often at a lower interest rate. The 910-day rule decides whether you can do it: a personal car loan must be more than 910 days old when you file. Call (310) 362-9071 and we will check your loan dates with you.
- 910 days is about two and a half years
- The part of the loan above the car's value is treated like a credit card
- Newer loans can still get a lower interest rate in many cases
At a glance
What a car loan cramdown is
A cramdown in Chapter 13 bankruptcy splits your car loan in two. The part equal to the car's value stays secured. The part above the car's value becomes unsecured debt.
You pay the secured part in full through your Chapter 13 plan, with interest. The unsecured part is paid like your other unsecured debts, such as credit cards and medical bills. Those debts often get only a small share in a Chapter 13 plan payment, and the rest is discharged when you finish.
Cars lose value fast. Many people owe far more than their car is worth, especially after rolling an old loan into a new one. A cramdown fixes that gap.
How the 910-day rule works
A special rule in 11 U.S.C. 1325(a) blocks a cramdown on some car loans. It applies when all of these are true:
- The lender has a purchase-money loan, meaning the loan was used to buy the car
- The car was bought for your personal use, not for a business
- You took out the loan within 910 days before you filed
If all three are true, you must pay the full loan balance through the plan to keep the car. If the loan is older than 910 days, you can usually cram it down to the car's value.
For other property bought on credit, such as furniture or electronics, the look-back is 1 year instead of 910 days.
Timing matters. If your loan is close to 910 days old, waiting a few weeks to file may open the door to a cramdown. That only works if waiting does not put the car at risk of repossession.
The interest rate in a cramdown
The interest rate is usually set by a formula from the Supreme Court case Till v. SCS Credit Corp. (2004). The court starts with the prime rate and adds a small amount for risk. The Court noted that courts have generally approved adds of 1% to 3%.
That is often far lower than a subprime car loan rate. So even when the 910-day rule blocks a cut in the balance, the plan may still pay the full balance at a lower rate. Whether that works depends on your plan and the court.
An example with round numbers
These numbers are for illustration only.
| Item | Loan older than 910 days | Loan newer than 910 days |
|---|---|---|
| Loan balance | $20,000 | $20,000 |
| Car's value | $12,000 | $12,000 |
| Secured part paid in full in the plan | $12,000 | $20,000 |
| Unsecured part | $8,000, paid like a credit card | None |
| Interest rate | Till formula rate | Often the Till formula rate |
In the first column, $8,000 moves into the unsecured pool. If unsecured creditors get a small share, most of that $8,000 is discharged at the end of the plan.
Other options for your car
- Surrender the car. If the car costs too much, you can give it back in the plan. Any balance left after the lender sells it is treated as unsecured debt.
- Keep paying outside the plan. If the loan is current and the terms are fair, you may keep paying the lender directly.
- Chapter 7 options. In Chapter 7 there is no cramdown, but you may be able to redeem the car for its value in one lump sum or keep your car by staying current.
- Protect your equity. If you own the car outright or have equity, see the California motor vehicle exemption.
Common cramdown mistakes
- Counting from the wrong date. The 910 days run from when the debt was incurred, usually the purchase date, not the first payment date.
- Using a high value for the car. The lender may object. Use a fair, supported value.
- Forgetting insurance. You must keep full coverage on the car while the plan pays the lender.
- Waiting too long. Once the car is repossessed and sold, a cramdown is no longer possible.
What it costs
- Chapter 7: flat attorney fee from $1,200, plus the $338 court filing fee
- Chapter 13: attorney fee quoted in writing, and part of it can be paid through the plan
- Payment plans are available, and the first consultation is free
More on Chapter 13 bankruptcy
- Chapter 13 bankruptcy in Beverly Hills
- Chapter 13 Eligibility and Debt Limits
- How a Chapter 13 Plan Payment Is Calculated
- Car Loan Cramdown and the 910-Day Rule
- Changing a Chapter 13 Plan After Filing
- Why Chapter 13 Cases Get Dismissed and How to Avoid It
- Chapter 13 Hardship Discharge
- The Co-Debtor Stay: Protecting a Co-Signer
- Mortgage arrears cure plan
- Second mortgage lien stripping in Chapter 13
- Converting Chapter 13 to Chapter 7
Car loan cramdown questions
What is the 910-day rule for car loans?
The 910-day rule says you cannot cram down a purchase-money loan on a car for personal use if you took the loan within 910 days before filing Chapter 13. You must pay that balance in full to keep the car.
Can I cram down a car loan in Chapter 7?
No, you cannot cram down a car loan in Chapter 7. Chapter 7 offers redemption instead, which means paying the car's value in one lump sum.
Can I cram down a leased car?
No, you generally cannot cram down a leased car, because a lease is not a loan. In Chapter 13 you can usually keep the lease or reject it and return the car.
How is my car's value decided?
Your car's value is based on what it would cost to buy a car of that kind, age and condition. We use pricing guides and the car's real condition. If the lender disagrees, the court decides.
Does a cramdown lower my interest rate too?
Yes, a cramdown usually lowers your interest rate too, because the plan uses the Till formula rate. That is prime plus a small amount for risk.
Free consultation
See if your car loan can be crammed down
Call (310) 362-9071 or send the form. Bring your car loan papers and we will check the 910-day date with you for free.
Law Offices of John Asuncion9454 Wilshire Blvd., Penthouse Floor
Beverly Hills, CA 90212
(310) 362-9071
Monday to Friday, 9 a.m. to 6 p.m.