Chapter 7 Bankruptcy

06 Jun How Bankruptcy Can Solve Your “Too Expensive Car” Problem

Next to home mortgages, motor vehicle loans are often your most expensive purchase. According to USA Today, the average transaction cost of a new car or truck sold in the U.S. was around $33,500. Lenders are now extending vehicle purchase loans to 6 years or longer, and when interest rates are factored in, you can easily find yourself responsible for $40,000, $50,000 or more. Unlike real estate purchases, motor vehicles are depreciating assets. If you finance your car or truck over 4 to 6 years, there is a good chance that you will owe more on your vehicle until year 3 or 4 of your contract. This means that in the event of a financial crises such as an illness or job layoff, you won’t be able to eliminate your financial obligations by selling your vehicle. If you “roll over” your loan into a new loan for a less expensive car, you’ll just delay your day of reckoning because you will end up owing far more on the less expensive car than it will ever be worth. Further, your installment payment is not your only vehicle expense. Insurance costs can rise quickly and unexpectedly if you or a family member has an accident. Routine maintenance and service such as new tires and brakes can add to your cost of ownership.
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19 May Why I Prefer Chapter 7 Bankruptcy to Chapter 13 Debt Consolidation

Most folks considering bankruptcy will consider two options - Chapter 7 and Chapter 13. Sometimes, you have the option of choosing either type of bankruptcy, whereas in other situations you would only be eligible to file either a Chapter 7 or a Chapter 13. When I meet with a client, I always start with the question of how can I fit this person into Chapter 7. It is not always possible, but, in my experience my Chapter 7 just works better - my clients get their discharge that wipes out debt completely, their cases are over in about 5 months, credit rebuilding can start within a year and the cost of bankruptcy is about 25% of the cost of Chapter 13.
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06 Jan Is Your Car Loan Underwater – What Are Your Options?

underwater car loanWould you be surprised to discover that your car is underwater? Not underwater in the sense of being wet, but in a financial sense. You are financially underwater with your loan if the fair market value of your vehicle is substantially less than the debt you owe. According to Edmunds.com, quite a lot of folks are significantly underwater with their loans. In 2016 nearly one-third of all vehicles offered for trade ins at dealerships are worth less than the debt encumbering those vehicles. By comparison, the underwater percentage was less than 14% in 2009.

Why Do Car Loans Get Upside Down and What Does it Mean?

There are several reasons why you may get upside down with your loan. First, the average term of car loans is getting longer - Experian reports that the average loan now lasts between 68 and 72 months. Further, the average loan now amounts to around $30,000. Second, vehicles are what as known as depreciating assets - they lose value every year and with every mile driven. When you do the math, you won’t break even on a $30,000 loan financed over 72 months at a 4% until year 3 or 4 of the loan. As the interest rate goes up, it may be year 5 or even year 6 before your loan balance falls below the vehicle value. If you trade in your underwater vehicle for a replacement (or if you have to replace a damaged or destroyed car) when the loan balance exceeds the fair market value, the replacement lender will reduce the unpaid balance by the wholesale value of the original car and “roll in” the remaining balance into a new loan. You may end up with Mercedes sized payments but a modest Chevrolet in your driveway.
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24 Mar What To Do If You Are a Creditor In a Bankruptcy?

Most of the posts on this blog, and in fact on most bankruptcy blogs, focus on the consumer as the bankruptcy debtor.  That makes sense--most bankruptcy cases involve a consumer debtor and a number of institutional creditors, like banks and credit card companies.  And those banks...

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