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Can Bankruptcy Reduce My Mortgage or Vehicle Payment?

Posted By Allmand Law Firm, PLLC || 11-Apr-2013

Bankruptcy may help reduce your vehicle payment but your mortgage payment may not have the same option. In other words, depending on which chapter you file you may be able to have your vehicle payment reduced, reaffirm your loan agreement with the lender, or set up a payment arrangement that helps you get caught up on missed or defaulted payments.

Chapter 7 bankruptcy can eliminate or discharge qualifying debt. In this sense, it may not reduce payments you make on your mortgage or vehicle, but if you have other debt obligations making it more difficult for you to make payments toward your home or vehicle, bankruptcy can wipe out such debts to improve your ability to make these payments. If you want to retain your property, such as your vehicle, you may need to sign a reaffirmation agreement with the lender that claims you will continue to make payments to avoid repossession or foreclosure.

Chapter 13 bankruptcy includes a court-approved repayment plan based on your income. Your vehicle may qualify for a payment reduction depending on how long payments have been made. Meaning, if you feel the vehicle is worth less than what the loan agreement states, you may be able to "cram down" or reduce the principal loan amount of the vehicle. Once the court reviews the value of the vehicle a lower payment amount may be determined. If you have fallen behind on your mortgage, Chapter 13 can help you get caught up on missed payments but it may not lower the amount you owe. Yet, the payments can be set up based on what you earn to improve your ability to make them regularly.

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