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Home 9 Bankruptcy 9 How a Chapter 13 Bankruptcy Can Lower Your Interest Rate

How a Chapter 13 Bankruptcy Can Lower Your Interest Rate

by | Dec 2, 2022 | Bankruptcy, Chapter 13 Bankruptcy, Video

Lowering Interest Rate Through Chapter 13 Bankruptcy

Because of your financial troubles, you wonder how a Chapter 13 bankruptcy can lower your interest rate. Fortunately, Chapter 13 allows you to reduce your car payment by lowering your car loan’s principal balance and interest rate.

Contact Miller & Miller Law, LLC if you have any questions concerning bankruptcy and car payments or want to discuss your case with an experienced bankruptcy attorney. We can discuss your case during a free case evaluation. We have offices around the state and can meet you wherever is most convenient.

Questions are natural when facing major life decisions like declaring bankruptcy or foreclosing. We have extensive knowledge of bankruptcy law and are here to provide you with straightforward, honest answers to your questions. You can make more informed decisions if you have a thorough grasp of the situation and are informed of the range of options available.

Our bankruptcy attorneys use experience, practice area knowledge, and cutting-edge technology to quickly, efficiently, and accurately drive your bankruptcy case forward. Learn how much of a difference having a good advocate can make in cases of bankruptcy, personal injury, disability, and estate planning. Send a message to Miller & Miller Law, LLC, to schedule a free case evaluation!

Why Do I Need a Bankruptcy Attorney in Wisconsin?

If you are considering bankruptcy, the best people to consult with are our bankruptcy attorneys. They are in the business of helping people get out of debt, so they are familiar with your situation. They can guide you through the whole process, whether you need guidance or want to file for bankruptcy protection.

  • A reasonable Wisconsin bankruptcy attorney will give you a better understanding of your bankruptcy options. When confronted with catastrophic debt, many people find bankruptcy daunting. Fortunately, your circumstances will be thoroughly evaluated when you hire a bankruptcy attorney. Your debt relief attorney will give you the best bankruptcy repayment plan based on this extensive, detailed knowledge of your debts and assets.
  • Having a Wisconsin bankruptcy attorney working for you means having better legal representation. The legal process of filing for bankruptcy is complicated. Fortunately, many attorneys have experience guiding clients through the system’s intricacies. A bankruptcy attorney can advise you and ensure your filing is done correctly.
  • A bankruptcy attorney will save you money. A bankruptcy attorney may help you save money by minimizing the number of exemptions you claim. Different states have different laws governing bankruptcy exemptions. Nonetheless, a bankruptcy attorney can help you choose the best possible set of Wisconsin bankruptcy exemptions for your bankruptcy case to save more of your property.
  • A Wisconsin bankruptcy attorney can negotiate better. A bankruptcy attorney can help you negotiate better terms on car loans, credit card debt, mortgages, and other debts and get debt collectors to stop harassing you. Miller & Miller Law, LLC will help you assess your options and negotiate a repayment plan with creditors. We aim to take the worry and uncertainty out of dealing with enormous debt. You and your family can enjoy a financially free life.
  • A Wisconsin bankruptcy attorney can save your home. There is a growing need for bankruptcy attorneys to help consumers who are underwater on their mortgages keep their homes. To stop foreclosure or selling your house at a lesser value, you must understand the legal process and act quickly. Therefore, a competent attorney knowledgeable in bankruptcy law is crucial.

Speaking with the attorneys at Miller & Miller Law, LLC can help you understand your alternatives to filing bankruptcy and even help stop collection actions. Discover how having a local attorney can help you with your bankruptcy and debt relief issues. Contact Miller & Miller Law, LLC immediately to arrange a free case evaluation and learn your alternatives to a bankruptcy filing.

What is Chapter 13 Bankruptcy in Wisconsin?

The Bankruptcy Code is divided into several chapters. Wisconsin Chapter 13 bankruptcy is the code section focusing on debt repayment based on disposable income. If the debtor fulfills their repayment plan, any dischargeable debt that remains can be released.

How Much Does Filing Chapter 13 Bankruptcy Cost in Wisconsin?

The fee for filing Chapter 13 bankruptcy is $313.00. You must pay this fee directly to the bankruptcy court when you file your bankruptcy petition.

Who is Eligible to File for Chapter 13 Bankruptcy in Wisconsin?

You must have a steady source of income, and your debts cannot exceed $1,000,000.00 – $750,000 worth of secured debt and $250,000 cost of unsecured debt. Individuals and sole proprietorships may seek relief under Chapter 13 bankruptcy if the conditions are met.

Qualifying for Chapter 13 bankruptcy can be expensive since the extra benefits come at a high cost, and many people cannot afford the monthly payment. To qualify, you must pay the greater of:

  • your priority nondischargeable debt,
  • the value of the nonexempt property,
  • your disposable income.

How Can a Chapter 13 Bankruptcy Lower Your Interest Rate in Wisconsin?

how a Chapter 13 bankruptcy can lower your interest rate

When you collaborate with your Chapter 13 bankruptcy attorney at Miller & Miller Law, LLC, the two of you will devise a repayment plan for your creditors, including the holder of your car loan. You will next submit the plan for approval to the bankruptcy trustee.

The Till vs. SCS Credit Corporation case, ruled by the United States Supreme Court in May 2004, established a reasonable interest rate to repay a creditor with whom a person under Chapter 13 bankruptcy has an outstanding car loan. Due to the May 2004 case, car loan lenders may charge 1-3% interest on top of the current prime interest rate. The decisive issue is whether the interest charged is sufficient to compensate the creditor for the car.

Assume you presently have a car loan with an interest rate of 18%. The current prime interest rate is 5.5% as of March 2019. This means the highest interest rate the lender can charge you is 8.5%. Although the lender may try to argue against it, as a petitioner in a Chapter 13 bankruptcy case, you have the legal right to pay a lower interest rate.

How Can Chapter 13 Lower Your Car Payment in Wisconsin?

If you’re considering filing Chapter 13 bankruptcy, you’re probably thinking, “Can Chapter 13 lower my car payment?” Chapter 13 gives you a better chance of lowering your car payment by lowering your car loan’s principal balance and interest rate.

By Reducing Your Car Loan’s Principal Balance

Because the typical car depreciates by 15–20% per year, it stands to reason that many car notes have a balance due that exceeds the car’s market value. Chapter 13 bankruptcy enables you to lower your loan’s principal balance to the current market value through a process known as “cram down.” For instance, if your car loan debt is $15,000 for a vehicle worth just $10,000, you may be able to lower the principal to $10,000.

Cram down is possible if your loan balance exceeds the car’s value and you acquired it at least 910 days before filing your chapter 13 bankruptcy case. This is called the 910-Day Cramdown Rule. Your monthly car payment can be lowered by reducing the outstanding balance you owe. If you’re near this timeline, you may be advised by your bankruptcy attorney to postpone filing your petition until the 910 timeline has passed for your bankruptcy protection to be maximized.

By Reducing Your Car Loan’s Interest Rate

Through Chapter 13, you can also reduce your car payment by lowering the interest rate you’re paying. You can restructure the terms of the promissory note that you signed with the creditors in Chapter 13 bankruptcy. You may adjust the note’s terms and conditions as part of your reorganization plan, making your car payment more affordable. If your interest rate is high, lowering it to a lower rate may save you thousands of dollars throughout the life of your loan.

The interest rate you can earn is determined by a formula established by the US Supreme Court in the Till case. The Till rate of interest is 1.5% points higher than the prime rate. If the prime rate is 3.25 %, your car loan could have an interest rate of 4.75 %. If you’re presently paying 10% interest on a $20,000 car loan, the money you would save in one year due to the reduced interest rate is $1,050. Furthermore, your overall monthly payment will be smaller, freeing you more money to pay off your student loan, prepare for retirement, or cover your household expenses.

The last option which chapter 13 bankruptcy can help you reduce the number of your car payments is to change the repayment term. Chapter 13 reorganization plans typically span 3 – 5 years. You can pay a reduced monthly fee if your car payments are extended for longer. However, you should consult with a bankruptcy attorney to assess the best alternative for providing a sustainable income for you while restructuring your debt at the same time.

Contact a Wisconsin Bankruptcy Attorney at Miller & Miller Law, LLC Today

If there are questions concerning bankruptcy and car payments you want to be answered, contact Miller & Miller Law, LLC, so that we can discuss your bankruptcy case. We have offices around Wisconsin and can meet you where it is most convenient.

Pick up your phone now and give us a call!