Reduce automobile loans

Chapter 13 bankruptcy allows you to lower the amount that you owe on many “secured” debts.   Secured debts are those debts where you pledge as collateral things that you own, such as a car, truck, furniture, and business equipment. 

Chapter 13 of the Bankruptcy Code allows you to pay off these types of debts for less than what you owe.  Instead of paying what you owe, you are allowed to pay only the value of the items serving as collateral.  To reduce the balance on a car loan you had to have had the loan for over 910 days. 

Another benefit of Chapter 13 is that you can reduce the interest rate that you pay on most secured debts.  Many people have car or furniture loans with interest rates as high as 20 percent or higher.   In a Chapter 13 bankruptcy you would only have to pay interest at the prime rate plus 1 or 2 percent.  As of January 9^th 2012, the prime rate is approximately 3.5 percent.