Chapter 13 Car Cramdowns: Slash Your Car Loan and Drive Debt-Free Faster
If you’re struggling with car payments and considering bankruptcy, you might be able to keep your car and pay less for it through a powerful tool in Chapter 13 called a “cramdown.” Here’s how it works—plus how courts determine the interest rate (aka the Till rate) and what that rate is today.
🔧 What Is a Car Cramdown in Chapter 13?
A car cramdown lets you reduce the amount you owe on your car loan to the actual value of the car—not what you originally borrowed. This means if you’re upside down on your loan, you only repay the portion that’s secured by the car’s current market value.
The rest of the loan (the unsecured portion) may be paid back at a lower percentage—or even wiped out entirely—through your Chapter 13 repayment plan.
✅ You keep the car.
✅ You lower your monthly payments.
✅ You pay less interest.
📏 Who Qualifies for a Car Cramdown?
You must meet two main requirements:
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The loan must be more than 910 days old (about 2.5 years). This is part of the so-called “910-day rule” in 11 U.S.C. § 1325(a)(hanging paragraph).
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The car must be for personal use.
If you got the car loan less than 910 days before filing or it’s for business use, you can’t cram it down.
💸 How Is the Cramdown Interest Rate Calculated?
The interest rate applied to the secured portion of the loan in a cramdown is determined using the Till formula, from the Supreme Court case Till v. SCS Credit Corp., 541 U.S. 465 (2004).
Here’s how the Till rate is calculated:
| Step | Description |
|---|---|
| 1. Start with the national prime rate | This is the base rate banks charge to their best customers. It’s currently 8.50% (as of June 2025). |
| 2. Add a risk adjustment | Courts typically add 1% to 3% depending on the debtor’s creditworthiness and plan feasibility. |
| 3. Get your Till rate | In most cases, debtors in Chapter 13 receive a Till rate of 9.5% to 11.5%. |
👉 In the Southern and Eastern Districts of New York, trustees and judges often accept a flat 10% cramdown rate unless contested.
🔍 Example: Cramdown in Action
Let’s say you owe $18,000 on a 6-year-old car, but it’s only worth $10,000.
| Loan Detail | Before Cramdown | After Cramdown |
|---|---|---|
| Balance Owed | $18,000 | $10,000 (secured) |
| Unsecured Portion | N/A | $8,000 (may be discharged) |
| Interest Rate | 15% (contract rate) | 10% (Till rate) |
| Monthly Payment | $550+ | $275–$325 |
Over 60 months, this could save you thousands of dollars.
📎 Legal Foundation for Cramdowns
Cramdowns are authorized by:
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11 U.S.C. § 506(a): Determines the secured vs. unsecured portions of a claim.
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11 U.S.C. § 1325(a)(5): Allows cramdowns as long as the secured creditor receives the present value of its collateral.
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Till v. SCS Credit Corp., 541 U.S. 465 (2004): Supreme Court case establishing the formula for setting cramdown interest rates.
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Local rules such as E.D.N.Y. LBR 3015-1 and 3015-2, which govern plan submissions and modifications in New York bankruptcy courts.
🚘 Bottom Line: Cramdowns Can Save Your Car—and Your Wallet
If your car is worth less than what you owe, Chapter 13 cramdown can be a smart way to lower your debt, keep your vehicle, and lock in a lower interest rate. But this option only works if your loan is old enough—and if you meet strict bankruptcy rules.
Have questions about whether you qualify for a cramdown or want to know the exact Till rate used in your court? Contact a knowledgeable bankruptcy attorney today.