Car Valuations in Bankruptcy:
In Chapter 13 bankruptcy you may be able to have the court reduce the debt on the car to the value of the car. The value is required to be the retail value, but this still can save man clients a good deal of money.
There are limit on whether this can be done. The most important limit is normally the car must have been purchased more than 910 days before the bankruptcy is filed. There are some circumstances when you could have the court rule what a car is worth even though it was purchased more recently. These include if the car was refinanced after it was purchased, if the car was purchased for business rather than personal use, or if the car was purchased for someone other than the buyer.
Even if the limit applies, it is still usually possible to reduce the interest rate on the car loan. Courts in Tampa are usually reducing the interest rates on the car loans to 5.25% now.
In Chapter 7 bankruptcy you can also have the Court rule on what a car is worth, but in Chapter 7 this value would have to be paid to the creditor in a lump sum payment shortly after the ruling is made. This makes the procedure much less common in Chapter 13 than in Chapter 7. There are entities that specialize in financing loans for persons in bankruptcy to allow them to repurchase cars through this process. However, these loans are usually for very high interest rates.