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Roger, Attorney
Category: Bankruptcy Law
Satisfied Customers: 31733
Experience:  BV Rated by Martindale-Hubbell; SuperLawyer rating by Thompson-Reuters
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If you file Chapter 7 and have a car thats underwater, will

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If you file Chapter 7 and have a car that's underwater, will certain lenders reduce the balance if you agree to keep and maintain the vehicle, assuming you can afford it? What's tht called?
Hi - my name is XXXXX XXXXX I'm a Bankruptcy litigation attorney. Thanks for your question.

In a chapter 13, it is possible to "cram down" the car loan balance to the current value of the vehicle. This is something that is allowable under the bankruptcy code. However, this is not allowable in a Chapter 7 filing. Thus, you don't have the RIGHT to modify the debt and reaffirm your obligation at a reduced amount. But, the lender may agree to do this - - it's totally up to the lender.

You would able to seek a reaffirmation agreement and negotiate the repayment amount with the lender. If the lender agrees, then you can do this.

But, if the lender doesn't agree, then it would have the right to re-take the vehicle and sell it by lifting the automatic stay under 11 USC 362.
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