Not only does a Philadelphia Chapter 13 bankruptcy have the ability to stop an auto repossession, it also has the ability to lower the car payments which you owe on the purchase of a vehicle. There are generally two ways in which the monies owing on the car can be reduced.
One method is the “cram down method”. Generally, for this rule to apply, the car debt must be over 910 days old – 2 and ½ years old. In that situation, one can reduce the amount of debt owing on the vehicle down to the value of the vehicle. For example, if the current value of the vehicle is worth $9,000.00 and the amount of the debt owed on the vehicle is $17,000.00, the secured balance owing on the vehicle can be reduced to $9,000.00. Interest is also paid on the balance but if the rate is high, one is able to reduce the interest rate to the market rate, which is generally considered by the Courts to be slightly higher than the prime rate. Any balance owing on the car which is not paid is considered as an unsecured debt. The result in many Chapter 13 cases is that the unsecured claim is paid very little or nothing at all on the unsecured claim. The cram down method is not permitted if the vehicle is less than 910 days from the date the vehicle was purchased. In that situation one is able to keep the vehicle but he or she must pay off the full debt owing on the vehicle through the Chapter 13 Plan.
There other instances and exceptions to the 910 day rule in which the amount owed on the vehicle can be reduced. You should discuss your situation with an experienced bankruptcy lawyer in Philadelphia who can advise you as to your specific circumstances.
If the amount owing on the vehicle is less than the value of the vehicle, there is no ability to reduce the debt owing on the vehicle since the creditor is considered to be fully secured.
You of course, always retain the right to surrender and give up the car in the Philadelphia Chapter 13 bankruptcy but if the vehicle is surrendered, you will no longer have the use of the vehicle and many people feel this not a good idea as they need a vehicle for work purposes, family needs and many other good reasons.
By consulting with an experienced Philadelphia Bankruptcy Lawyer you can get a good idea of what makes the most sense for you in your situation.