[author: Win Mims]
One of the major benefits of filing a Chapter 13 case is the ability to modify (cram-down) a loan on a motor vehicle. Circumstances vary by case, but when a client has purchased a vehicle and has signed a standard "Retail Installment Contract", generally the interest rate and principal balance can be modified (cram-down) and in most cases, the monthly payment to the lender through the Chapter 13 plan can be significantly reduced for an across-the- board saving for the client.
The same result ("cram-down") also could be obtained if the client earlier paid off the vehicle, but later found it necessary to use the vehicle as collateral to obtain a loan from another lender. In each case, the client would retain title to the vehicle and, at most, the lender would have only a security interest or "lien" on the vehicle. In each of these situations, our experienced bankruptcy attorneys could walk that client through the "cram-down" analysis and show that client how he or she would benefit.
The other option: a pawn transaction
On the other hand, if you enter into a "pawn transaction", Georgia law permits you to pledge a motor vehicle by giving the "pawnbroker" possession of the certificate of title. As a result, although you continue to operate the vehicle, the pawnbroker has legal title to the vehicle and also is considered to legally have possession of the vehicle. To recap, in a pawn transaction, you have agreed to pledge (think "conditional sale") the vehicle on the condition that the vehicle may be redeemed or repurchased by you for a fixed price within a fixed period of time set out in the pawn contract. The contract establishes a maturity date for the payment of the principal amount due plus interest and other charges unless the parties agree in writing to extend or continue the maturity date.
If a motor vehicle is pledged, Georgia law allows you to have an additional 3D-day "grace period" after the maturity date to redeem (or repurchase) the vehicle. A pledged vehicle not redeemed within the grace period is automatically forfeited to the pawnbroker. Contact one of our experienced attorneys to discuss your situation.
Stay tuned for Part II…
Posted in Chapter 13 Bankruptcy
Tagged bankruptcy attorney, Chapter 13 case, loan, motor vehicle, pawn contract, pawn transaction, pawnbroker
