The 910-Day Rule for Car Loans in Chapter 13

Short answer: if you financed the car within the last 910 days (roughly two and a half years) before you file, and it was bought for your personal use, Chapter 13's "cramdown" tool generally can't reduce that loan to the car's current value — you'll typically need to pay the full remaining balance to keep the car. Once the loan passes that 910-day mark, cramdown becomes available again, and loans that were never purchase-money in the first place (like money borrowed against a car you already owned) aren't covered by the rule at all.

This page explains what the "910-day rule" actually says, why it exists, how negative equity from a trade-in complicates things, and what it can mean for when you file. It's general information about how the rule works, not legal advice about your loan.

What "cramdown" normally does

In a Chapter 13 repayment plan, you generally keep your property and pay creditors over a three- to five-year plan instead of liquidating assets, as you would in Chapter 7. One of the tools available in a Chapter 13 plan is "cramdown": for many types of secured debt, if you owe more than the collateral is currently worth, the plan can split the debt into a secured claim (equal to the collateral's value, which must be paid in full through the plan) and an unsecured claim for the rest (which is often paid at only cents on the dollar, along with your other unsecured debts). This comes from 11 U.S.C. § 506, which lets a bankruptcy court value a secured claim based on the collateral rather than the original loan balance.

For a car loan, that would mean: if you owe more than the car is worth, the plan only has to pay the car's actual value as the secured piece, with the remaining balance treated like an ordinary unsecured debt. Without a special rule, this would apply to car loans the same way it applies to other secured debt.

The "hanging paragraph" and the 910-day carve-out

Congress carved out an exception for certain car loans in the 2005 bankruptcy law amendments. The exception is nicknamed the "hanging paragraph" because it was added to the end of § 1325(a) without its own numbered subsection. In plain terms, it says that § 506's valuation-and-split rule does not apply to a claim if:

• the creditor has a purchase-money security interest — meaning the loan was used to buy the specific vehicle that secures it, not a loan taken out against a car you already owned;
• the debt was incurred within the 910 days immediately before you filed your bankruptcy petition; and
• the collateral is a motor vehicle acquired for the debtor's personal use (a car bought mainly for business use, or other types of collateral, fall under a separate one-year lookback rather than the 910-day window).

When all three conditions are met, the loan is "un-crammable": the plan generally has to treat the full contract balance as a secured claim and pay it in full to keep the car, even if the car is worth significantly less than what's owed. Once the loan is 910 days old or older on your filing date, or if it doesn't meet all three conditions in the first place, ordinary cramdown treatment under § 506 is back on the table.

You can read the statute itself, including the hanging paragraph, in the Bankruptcy Code at 11 U.S.C. § 1325(a), available through the U.S. government's official code publication linked from the U.S. Courts website.

Why the rule exists

Lenders and auto dealers pushed for this carve-out during the 2005 reform, arguing that letting brand-new car loans be crammed down right after purchase undercut the deal they'd priced the loan on, since a new car depreciates quickly the moment it's driven off the lot. The 910-day window roughly reflects the period during which a new car's value drops fastest relative to what's still owed. The trade-off is that filers with a recently financed vehicle have less flexibility to lower that specific payment through Chapter 13, even if the rest of their budget is genuinely squeezed.

Negative equity: the part courts don't agree on

Many car loans include "negative equity" — the leftover balance from a trade-in that was rolled into the new loan because the trade-in was worth less than what was still owed on it. For example, if you owed more on your old car than it was worth and the dealer folded that difference into your new car loan, that folded-in amount is negative equity.

Whether negative equity counts as part of the protected "purchase-money" debt under the hanging paragraph, or whether it should be split out and treated as an ordinary claim regardless of the 910-day timing, has been litigated extensively and courts have not landed on one uniform answer:

• Some courts hold that negative equity is part of the "price" of acquiring the new vehicle and gets the same purchase-money treatment as the rest of the loan.
• Other courts hold that negative equity is not purchase-money debt at all — it was already owed before this purchase — and apply either a "transformation" approach (the whole loan loses its purchase-money status) or a "dual-status" approach (the purchase-money and non-purchase-money portions are treated separately) depending on the jurisdiction's precedent.

Because the outcome genuinely varies by court and by the specific facts of the loan, don't assume how your negative equity will be treated. This is exactly the kind of issue where a bankruptcy attorney familiar with your local courts' case law can tell you what's likely to happen, rather than relying on a general rule.

What still works even when cramdown doesn't

A car loan being "un-crammable" on the principal doesn't necessarily mean Chapter 13 offers no relief:

• Interest-rate reduction. Many courts will still reduce the interest rate on the secured claim to a court-determined rate — often based on the prime rate plus a modest risk adjustment, a framework that traces back to the Supreme Court's decision in Till v. SCS Credit Corp. That can meaningfully lower your monthly payment and the total interest paid, even though you're still paying the full principal balance.
• Stretching payments over the plan term. Spreading the balance over the length of your Chapter 13 plan, rather than the original loan's shorter term, can also lower the monthly payment compared to what you were paying before you filed.
• The automatic stay. Filing Chapter 13 immediately stops repossession efforts under 11 U.S.C. § 362, giving you breathing room to address the loan through the plan rather than losing the car to a repossession that was already in motion.

Planning implications for when you file

Because the 910-day count runs to your filing date, the timing of when you file, not just when you file at all, can determine whether a car loan is eligible for cramdown. A few practical points:

• If your loan is close to the 910-day mark and cramdown would make a real difference to your budget, it may be worth discussing the timing with an attorney — but only after weighing it against other pressures, like a pending garnishment, foreclosure, or a creditor lawsuit, where delay could cause its own harm.
• The 910-day rule only concerns whether the loan's principal can be reduced. It does not affect whether you can keep the car at all — surrendering the vehicle and discharging any remaining unsecured deficiency, or simply paying the loan in full through the plan, both remain options regardless of the loan's age.
• Refinancing a car loan can sometimes affect how courts treat its purchase-money status, and the outcome can depend heavily on your court's precedent and the specific terms of the refinance. Don't assume a refinance either resets or preserves your position — have it reviewed.

What to do

1. Find the exact date you signed your car loan (or refinanced it) and compare it to a likely filing date to see where you fall relative to the 910-day window.
2. Pull your loan documents and note whether any negative equity from a trade-in was rolled in, since that can affect how the loan is treated.
3. Get the car's current value estimated so you and an attorney can see how much a cramdown, if available, would actually save.
4. Talk to a qualified bankruptcy attorney about how courts in your district have handled negative equity and refinanced loans under the hanging paragraph — this varies by location.
5. Review your options with your attorney for the loan overall: keep it and pay in full (with a possible interest-rate reduction), cram it down if eligible, or surrender the car and discharge any deficiency.
6. Confirm current procedural details — filing fees, required pre-filing credit counseling, and general Chapter 13 mechanics — at the U.S. Courts bankruptcy pages and the Department of Justice U.S. Trustee Program site, since these are updated periodically.

For the bigger picture of how a Chapter 13 case is structured and paid for, see our guide to Chapter 13's repayment plan. For a general look at what happens to vehicle loans across both chapters, see car loans and repossession in bankruptcy.

A word about scams

If you're behind on a car payment and searching for a way out, you're a prime target for for-profit "debt relief" or debt-settlement companies that charge large upfront fees and can't actually stop a repossession or restructure a car loan the way a real Chapter 13 case can. Non-attorney "petition preparers" are legally barred from giving legal advice about things like cramdown eligibility, even if they offer to. For low-cost, legitimate help, consider legal aid, a law-school bankruptcy clinic, your bankruptcy court's self-help resources, or a credit-counseling agency approved by the U.S. Trustee Program.

This article is general legal information, not legal advice, and reading it doesn't create an attorney-client relationship. Whether a specific car loan qualifies for cramdown depends on precise dates, loan terms, and how your local courts have ruled on issues like negative equity — talk to a qualified bankruptcy attorney before assuming either outcome, and be wary of any company that asks for large upfront fees to "settle" your debts.