Chapter 13 Vehicle Cramdown in Florida: How to Reduce Your Car Payment in Bankruptcy

For many Florida residents considering bankruptcy, a high car payment is one of the debts pushing them toward financial crisis. Underwater auto loans -- where you owe significantly more than the vehicle is worth -- are common, especially among borrowers who financed through subprime lenders with high interest rates and extended loan terms. Chapter 13 bankruptcy offers a remedy called "cramdown" that can dramatically reduce both the principal balance and interest rate on qualifying vehicle loans.

Attorney Steven C. Fraser uses cramdown provisions in Chapter 13 plans across all three Florida bankruptcy districts to help clients keep their vehicles while paying a fair price for them.

What Is a Vehicle Cramdown?

A vehicle cramdown under 11 U.S.C. Section 1325(a)(5) allows the bankruptcy court to bifurcate an undersecured car loan into two claims: a secured claim equal to the vehicle's current fair market value, and an unsecured claim for the difference between the loan balance and the vehicle's value.

The secured portion is paid in full through the Chapter 13 plan, typically at a reduced interest rate. The unsecured portion is lumped in with your other unsecured debts (credit cards, medical bills) and paid at whatever percentage your plan provides -- often pennies on the dollar.

Before and After Cramdown: A Practical Example

In this example, the debtor saves over $10,000 in principal and reduces their effective interest rate by more than 11 percentage points. The $10,000 unsecured deficiency is paid alongside other unsecured debts at whatever percentage the plan provides -- often 10% or less in Florida consumer cases.

The 910-Day Rule

Cramdown is not available for every car loan. Section 1325(a)(9), commonly called the "hanging paragraph" or "910-day rule," restricts cramdown for purchase-money security interests in motor vehicles acquired within 910 days (approximately 2.5 years) before the bankruptcy filing date.

If you purchased your vehicle within 910 days of filing, the entire loan balance must be treated as a secured claim -- no bifurcation, no cramdown. You must pay the full balance through the plan, though the interest rate may still be adjusted downward under the Till formula.

If you purchased your vehicle more than 910 days before filing, cramdown is available, and you pay only the vehicle's current fair market value as a secured claim.

Counting 910 Days

The 910-day period runs from the date you incurred the purchase-money debt -- typically the date you signed the financing agreement -- to the date the bankruptcy petition is filed. The count includes weekends and holidays. For a vehicle financed on January 1, 2024, the 910-day threshold would fall on approximately June 30, 2026. Filing on or after that date enables cramdown.

The Till Interest Rate

When a vehicle is crammed down in Chapter 13, the interest rate on the secured claim is not the contract rate from your original loan. Instead, courts in the Eleventh Circuit (which covers all Florida federal courts) apply the formula from the Supreme Court's decision in Till v. SCS Credit Corp., 541 U.S. 465 (2004).

The Till formula starts with the national prime rate and adds a risk adjustment, typically 1% to 3%, to account for the risk of non-payment in bankruptcy. As of early 2026, with the prime rate in the range of 7.5%, the resulting Till rate in Florida cases is generally between 8.5% and 10.5%, depending on the circumstances.

Even at the high end, this represents a dramatic reduction from the 15% to 24% interest rates common on subprime auto loans. The interest savings alone can make Chapter 13 worthwhile for many Florida debtors.

Determining Fair Market Value

The vehicle's fair market value is the secured claim amount in a cramdown, so accurate valuation is critical. Under the Supreme Court's decision in Associates Commercial Corp. v. Rash, 520 U.S. 953 (1997), the replacement value standard applies -- meaning the price a retail buyer would pay for a comparable vehicle, accounting for the vehicle's age, mileage, and condition.

In Florida bankruptcy practice, courts commonly rely on NADA (National Automobile Dealers Association) retail values, though Kelley Blue Book values and dealer estimates are also considered. The trustee and creditor may challenge the debtor's valuation, leading to negotiation or, in contested cases, an evidentiary hearing.

Attorney Fraser uses NADA retail values adjusted for condition and mileage as the starting point for cramdown valuations and is prepared to support those values with evidence if challenged by the lender.

Cramdown Across Florida's Three Districts

While the cramdown statute is federal, procedural practices vary slightly across Florida's three bankruptcy districts:

• Northern District (NDFL): Cramdown provisions are included in the Chapter 13 plan itself. The plan specifies the vehicle, the claimed value, the Till rate, and the monthly payment. Creditors must object within the plan objection deadline if they dispute the valuation.
• Middle District (MDFL): The MDFL also handles cramdown through the plan. The court's model plan form includes specific sections for secured claims treatment, including cramdown values and interest rates. The MDFL's negative notice procedures mean that if the creditor does not object within the notice period, the cramdown is approved.
• Southern District (SDFL): Similar to the other districts, cramdown is addressed in the plan. The SDFL's trustee practices may include more scrutiny of valuations in cases where the claimed value is significantly below the NADA retail figure.

Vehicles That Qualify (and Do Not Qualify)

The 910-day rule applies only to purchase-money security interests in motor vehicles acquired for the personal use of the debtor. This creates several categories:

• Eligible for cramdown (purchased more than 910 days ago): Cars, trucks, SUVs, motorcycles, and other motor vehicles where the loan has been outstanding for more than 910 days.
• Not eligible for cramdown (purchased within 910 days): Recent vehicle purchases. The full loan balance must be paid as a secured claim, though the Till rate still applies to reduce interest.
• Always eligible for cramdown: Vehicles used for business purposes (not personal use), vehicles where the loan is not a purchase-money security interest (e.g., title loans), and vehicles with loans from credit unions in some circumstances.

What Happens to the Vehicle After Plan Completion

When you complete your Chapter 13 plan and receive a discharge, the cramdown is finalized. The lender's lien is reduced to the amount actually paid as the secured claim, and any remaining lien is released. You own the vehicle free and clear of the original loan obligation.

If you fail to complete the plan, however, the cramdown is not finalized. If the case is dismissed, the original loan terms are reinstated, and the lender can repossess the vehicle for any default. This is one of the key reasons completing the Chapter 13 plan is so important for debtors who rely on the cramdown provision.

This article is for general informational purposes only and does not constitute legal advice. Consult with a licensed attorney for advice specific to your situation.