Bankruptcy's 910 Day Rule
Debt troubles don't really have a timeline where things start out bad and then get a better over time. To the contrary, debt troubles start out slow and then snowball into an avalanche of financial crises which usually end only once the debtor files bankruptcy. That's why bankruptcy's 910 day rule doesn't make much sense. The rule states that a debtor cannot modify any portion of a car loan if the car was financed within 910 days of filing bankruptcy. So what should a bankruptcy debtor do if they purchased a car with a subprime loan within 910 days?
If You Have Purchased a Car With a Subprime Loan Within 910 days
- You can wait until after 910 days to file bankruptcy. Even if you file bankruptcy 911 days after you financed the vehicle, you will be able get the full benefits of bankruptcy's "cram down" possibilities.
- You can go ahead and file bankruptcy and then surrender the vehicle to the lender. You will be able to discharge balance of the loan if the auction price doesn't cover the full cost of the outstanding loan.
- You could try to get the lender to negotiate with you and modify your loan during bankruptcy; but don't hold your breath. Unlike prime car loans, subprime loans belong to a system which is actually designed to quickly "recycle" repossessed vehicles back into the marketplace. Because of the ease of reselling vehicles with subprime loans, lenders are not motivated to negotiate during bankruptcy. Besides, holding on to a car with a subprime loan isn't good financial sense and could jeopardize your fresh start after bankruptcy.