New Jersey Lawyer Explains How Someone Can Reduce Auto Payments In New Jersey Bankruptcy Case.
In a New Jersey chapter 13, a debtor may be able to keep their auto by paying less than the total amount that is due on the auto financing. This process is called a cramdown. Under certain circumstances, a debtor is permitted to reduce the loan amount to the retail value of the vehicle, plus a reasonable interest rate. The value, plus the interest rate, must be paid through the bankruptcy plan. The loan balance that is due in excess of the auto value amount, may be eliminated, under most situations.
The bankruptcy code does not permit such a reduction, if the loan financed the purchase of the vehicle, for personal use, within 910 days prior to the bankruptcy filing. Also, this reduction is not permitted with a leased vehicle. The following is an example of the above explanation. A $10,000.00 auto value has a $15,000.00 finance balance. The debtor may keep the auto by paying $10,000.00, plus a fair interest rate, through the bankruptcy trustee payments.
The court uses the retail value of the auto, as if the exact same auto is sold on a dealership’s lot. In other words, the value is based on the year, make, model, mileage and condition of the debtor’s car. The court will accept as proof of the valuation of the auto, an NADA or Kelley Blue Book internet printout, based on the auto’s detailed specs. However, if the finance company objects to the value, than an expert appraiser would be necessary.
Finding an expert to appraise an auto in New Jersey is difficult. However, in order to prove the value of the auto, it is necessary for an expert to appraise the vehicle, who will testify in court. If both parties cannot agree to a value, the finance company will also obtain an appraisal of the auto. Most likely, the appraisal will facilitate a settlement of the value for a reasonable figure. However, if a settlement cannot be reached, than both appraisers must testify, with the judge making a determination. as to the value.