cram down Tag

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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01 Jun Sub-prime Loans are Back – this time in Auto Loans

credit for credit challenged car buyersAn article in this past week's issue of the online publication Collection & Credit Risk raises the question of whether the spread of sub-prime loans in industries other than mortgages could prompt a replay of the Great Recession of 2009. According to credit bureau Experian, financing for new and used vehicles to borrowers with credit scores less than 680 comprised almost 42% of all automobile financing during the first quarter of 2011, and the trendline for this type of financing is on the rise. Industry experts note that the wholesale (used) car market is very strong. Repossession is relatively easy and used car valuations are up. This has attracted more lenders to market towards credit challenged individuals. GM, which sold GMAC and exited the car financing business several years ago, has quietly re-entered the vehicle financing business by purchasing a sub-prime lender (now named GM Financial). Other large financing companies are expected to follow suit.
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09 Nov South Carolina Bankruptcy Lawyer Unleashes Vulcan Intellect on the Hanging Paragraph

Dennis Toney's Hand In a move that shocked and amazed the South Carolina bankruptcy community, attorney Dennis Toney of Charleston scored a big victory for his clients by successfully challenging the application of the 910-day rule. Toney's keen analysis has led some to question whether Toney is part Vulcan, or 100% human as previously thought. An investigation is ongoing. It all started with a fairly routine Chapter 13 filing in the Charleston division (In re Brown, Case No. 09-03846). Toney's clients, Harold and Gertrude Brown, proposed to "cram down" Mr. Brown's 2007 Toyota Camry. A cram down occurs when the secured creditor will only be paid the value of its collateral, rather than the entire balance owed on the loan. In this case Mr. Brown owed $21,788 on the vehicle, but he proposed to pay only $15,375--the value of the vehicle--to Regions Bank on its secured claim. The cram down provision called for separation of the claim into two parts: a secured claim in the amount of $15,375 to be paid with interest, and an unsecured claim in the amount of $6,414. The unsecured claim would receive only a small percentage of the total claim, and no interest. Predictably, the bank objected to confirmation of the plan. The problem with Toney's proposed plan was that the valuation of the vehicle seemed to be prohibited by the 910-day rule, which is part of the new 2005 bankruptcy law.
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11 Feb Mortgage Bankers Want Your Home, Not Your Money

Congress is considering changes to the Bankruptcy Code that would allow the same judicial modification of home mortgages that is currently allowed for vacation homes, business property, and other assets. Letting families keep their homes by reducing principal and interest to market value would let tens of thousands of homeowners resume making their mortgage payments, halt many of the 46,000 foreclosures that are taking place each week, and stop the glut of foreclosed homes on the market that are continually ratcheting housing prices downward. But surprise, surprise, the Mortgage Bankers Association opposes these changes. Why? Let's look at the facts.
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31 Dec Changing Mortgages in Chapter 13’s–Is It Time?

Today's Wall Street Journal (December 31, 2008) has a front-page story titled, "Mortgage 'Cram-Downs' Loom as Foreclosures Mount." Discussed is the question of whether the new congress will allow "cram-downs" of residential mortgages in Chapter 13 and 11 cases. A cram-down is where the terms of...

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