What is the significance of 910 days for car loans?

910 days (about two and a half years) is an important threshold in the life of a car loan for a prospective filer of chapter 13 bankruptcy.

Like other secured loans, a car loan can become underwater or undersecured, where the value of the car is less than the amount owed on the loan. This most often happens when cars are purchased new and depreciate faster than the loan balance is repaid. It also occurs when loans have high interest rates or when the car loses value unusually fast, as is the case of high mileage or an unpopular make and model.

The so called "hanging paragraph" of section 1325(a) of the bankruptcy code uses 910 days from the date a secured loan was incurred to purchase a car to draw a line between two methods of treating an undersecured loan. These methods apply when a debtor proposes to keep the car in a chapter 13 plan and pay the creditor, and the creditor has not agreed to something different. Newer loans, those incurred in the 910 days prior to filing bankruptcy, are paid in the full amount owed. Older loans, those incurred prior to the 910 day period, may be paid at the value of the car when the value is less than the outstanding balance.

This 910 day period can be an important timing consideration, potentially making the car loan more affordable to pay within a chapter 13 bankruptcy.

This rule providing car lenders with special protection was instituted by Congress as part of the 2005 bankruptcy law (BAPCPA).

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