What Is the 910 Day Rule in Bankruptcy: Car Loan Cramdown Protection
The 910 day rule protects car lenders from strategic bankruptcy filings. If you purchased a vehicle within 910 days, roughly two and a half years, before filing Chapter 13 bankruptcy, you must pay the full loan balance rather than just the car's current value. This single rule can add thousands of dollars to your repayment plan.
I watch clients faces fall when I explain this one. They bought a car two years ago, it is now worth $15,000, but they still owe $22,000. They assumed bankruptcy would let them pay based on current value. The 910 day rule says otherwise.
910 Day Rule Scenarios
| Scenario | What You Owe | What You Pay in Chapter 13 |
|---|---|---|
| Car bought 3+ years ago, worth $12K, owe $18K | $18,000 | $12,000 (cramdown applies) |
| Car bought 2 years ago, worth $12K, owe $18K | $18,000 | $18,000 (910 rule applies) |
| Car bought 1 year ago, worth $15K, owe $20K | $20,000 | $20,000 (910 rule applies) |
| Car bought 4 years ago, worth $8K, owe $10K | $10,000 | $8,000 (cramdown applies) |
How the 910 Day Rule Actually Works
The rule comes from the 2005 Bankruptcy Abuse Prevention and Consumer Protection Act, which Congress passed partly in response to creditor complaints about people buying expensive vehicles shortly before filing bankruptcy. Lenders argued that cramdown provisions were being abused to get nearly-new cars at steep discounts.
Cramdown is the normal Chapter 13 procedure for secured debts like car loans. You pay the current market value of the collateral rather than the full loan balance, with the remaining amount treated as unsecured debt that may receive pennies on the dollar. It is one of Chapter 13's most powerful tools for reducing what you owe.
The 910 day rule creates an exception. For vehicles purchased within that window, cramdown does not apply. You must pay the entire loan balance through your Chapter 13 plan. The lender's secured claim equals whatever you owed at filing, not what the car is worth.
Expert insight: "The 910 day rule does not change your interest rate on the car loan, just whether you can reduce the principal. Sometimes strategic timing of your filing date, if possible, can save thousands."
Why Congress Chose 910 Days Specifically
Congress chose this number somewhat arbitrarily, but the logic was preventing abuse while not overly burdening honest filers. Typical car loans run five to six years. By the 910 day mark, about 42% through a five-year loan, significant depreciation has occurred while substantial balance remains.
A car purchased for $30,000 might be worth $18,000 after 910 days but still have $22,000 owed. Without the rule, the owner could file Chapter 13, pay $18,000 over the plan period, and keep a car that cost them $30,000 originally. The lender absorbs the $4,000 difference plus their lost interest.
The rule only applies to Chapter 13 cases because Chapter 7 does not involve cramdown for vehicle loans. In Chapter 7, you either reaffirm the debt at original terms, surrender the vehicle, or redeem it by paying current value in a lump sum.
Calculating Your 910 Day Window
Accurate calculation matters because even one day outside the window dramatically changes your situation. Start with your anticipated filing date, then count backward exactly 910 days. Any vehicle purchased on or after that date falls under the rule.
The purchase date is typically the contract date, not the delivery date or first payment date. Check your sales contract for the exact date. If you are close to the boundary, even a few days of delayed filing might move you outside the window and enable cramdown.
For example, if you plan to file on December 1, 2024, counting back 910 days lands on approximately June 5, 2022. A car purchased on June 4, 2022 would fall outside the rule, so cramdown applies. A car purchased on June 6, 2022 would fall inside, meaning full balance is required.
Impact on Your Chapter 13 Plan
The financial difference between cramdown and full-balance payment can reshape your entire Chapter 13 plan. Consider a vehicle worth $14,000 with a $21,000 balance. Under cramdown, you would pay $14,000 over your plan period, potentially at a reduced interest rate. Under the 910 day rule, you pay all $21,000.
That $7,000 difference must come from somewhere. Either your monthly plan payment increases, your plan length extends toward the five-year maximum, or other creditors receive less. The ripple effects touch every aspect of your bankruptcy.
Higher payments strain budgets and increase the risk of plan failure. I have seen cases where 910 day rule obligations pushed monthly payments beyond what clients could sustainably afford. Some converted to Chapter 7 and surrendered vehicles.
Expert insight: "Do not let car pride sink your bankruptcy plan. If 910 day rule payments make your plan unsustainable, surrender the vehicle, eliminate the debt, and buy a reliable used car for cash after discharge."
Strategies for Dealing With the 910 Day Rule
Strategic timing, when possible, offers the clearest path around the rule. If you are within a few months of the 910 day boundary, delaying filing might be worth the wait. Use that time to stockpile cash for plan payments, negotiate with creditors for breathing room, or address other pre-filing matters.
Surrendering the vehicle eliminates the problem entirely. If you are significantly underwater on a recent car purchase, keeping it may not make financial sense regardless of the 910 day rule. Surrender removes both the debt and the rule's application. The remaining deficiency becomes unsecured debt dischargeable at plan completion.
Negotiating with lenders directly sometimes produces results. Some auto lenders prefer receiving guaranteed payments through a Chapter 13 plan over the uncertainty of repossession and auction. They may agree to modified terms even when the 910 day rule technically applies.
Frequently Asked Questions
Does the 910 day rule apply to Chapter 7?
No, it only affects Chapter 13 cramdown calculations. Chapter 7 handles car loans through reaffirmation, surrender, or redemption.
Can I pay off my car loan before filing to avoid the rule?
Yes, but you would need the cash to do so. Paying a car loan shortly before filing with funds that could have gone to unsecured creditors might be challenged.
What interest rate applies to 910 day rule payments?
Courts vary, but many allow the Till formula rate, which is prime plus a risk adjustment, even for 910 day vehicles.
Does refinancing my car restart the 910 days?
Generally no. Courts look to the original purchase date, not subsequent refinancing.
What if I co-signed for someone else's car?
Co-signer liability falls under the rule if the purchase was within 910 days, but the vehicle itself belongs to the primary owner.
Can the 910 day rule be waived?
Lenders can agree to cramdown voluntarily, but they rarely do. It never hurts to negotiate.
Updated 2025-01-07