What the 910-Day Rule Could Mean for Your Car Loan in Baltimore

Key Takeaways: Under Chapter 13’s federal 910-day rule, if you bought a car for personal use with a purchase-money loan within 910 days (about 2.5 years) before filing, you generally can’t reduce the secured claim to the car’s lower current value. If you keep the car, you generally must pay the full loan balance through your plan. The rule works the same way in Baltimore as everywhere else, with cases filed in the U.S. Bankruptcy Court for the District of Maryland, where Fourth Circuit decisions are binding. Even inside the window, courts may still use a Till prime-plus interest rate, which can cut costs for borrowers with high-rate loans. Courts have disagreed on negative equity, add-ons, and surrender, though the Fourth Circuit treats negative equity as purchase-money debt. Filing date can change the result, but waiting must be weighed against repossession risk and the protection of the automatic stay. Many drivers can still keep their cars with a realistic plan and full disclosure, and the co-debtor stay may protect co-signers.

If you bought your car within 910 days (about two and a half years) before filing Chapter 13, the 910-day rule may require you to pay the full loan balance through your plan rather than the car’s lower current value. That can change your monthly plan payment, whether you keep the vehicle, and how you budget. For Baltimore drivers who rely on a car to get to work, school, and medical appointments, understanding this rule before filing can help you avoid surprises.

The team at Sanchez Garrison & Associates, LLC can review your car loan and repayment options with you. Call (410) 734-2200 or contact us now to schedule a consultation.

The 910 Day Rule Chapter 13 Explained in Plain Terms

The 910-day rule comes from a provision Congress added to the Bankruptcy Code in 2005. The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) added an unnumbered sentence after 11 U.S.C. § 1325(a)(9), called the "hanging paragraph." It limits a debtor’s ability to "cram down" certain car loans in Chapter 13.

Normally, Chapter 13 allows a debtor to split an undersecured loan into two parts. Under 11 U.S.C. § 506(a), a secured claim is generally valued at the collateral’s current worth, and the remaining balance is treated as unsecured debt. For qualifying vehicle loans, the hanging paragraph says § 506 does not apply for purposes of § 1325(a)(5). As a result, a debtor who keeps the car generally must treat the creditor’s full claim as secured.

The Conditions That Trigger the Rule

The hanging paragraph generally applies only when all of the following conditions are met. If any one is missing, the standard cramdown analysis may still be available:

• The creditor holds a purchase-money security interest, meaning the loan was used to buy the vehicle
• The debt was incurred within 910 days (about 2.5 years) before the bankruptcy filing date
• The collateral is a motor vehicle, as defined in 49 U.S.C. § 30102
• The vehicle was acquired for the personal use of the debtor

Each condition can raise fact questions. For example, a car bought mainly for a business may fall outside the "personal use" requirement. Courts generally focus on the debtor’s intended use at the time of purchase.

Thing 1: The Rule Applies the Same Way in Maryland as Everywhere Else

Because the 910-day rule is federal law, it generally applies the same way in Baltimore as in other U.S. cities. Maryland’s bankruptcy exemptions generally do not change how the hanging paragraph works, though state law can affect related questions, such as whether a lien is purchase-money.

Local Chapter 13 cases are filed in the United States Bankruptcy Court for the District of Maryland. The Maryland federal bankruptcy court has courthouses in Baltimore and Greenbelt. Appeals generally go first to the U.S. District Court for the District of Maryland and then to the Fourth Circuit, whose decisions bind the bankruptcy court.

Thing 2: Inside the Window, You May Be Required to Pay the Full Balance

If your loan falls within the 910-day window and you keep the car, your plan generally must pay the full claim amount, not just the car’s depreciated value. Cars lose value quickly, so the gap between what you owe and what the car is worth can be thousands of dollars.

Here is how the outcome may differ depending on timing. The figures below are illustrative only.

The rule does not necessarily lock in your contract interest rate. Courts commonly apply the "prime-plus" approach from Till v. SCS Credit Corp., 541 U.S. 465 (2004), when setting the interest rate a secured creditor receives under 11 U.S.C. § 1325(a)(5)(B). Many courts have held that this approach still applies to 910-day claims. For borrowers with high-rate subprime loans, a court-determined rate may reduce the total cost, even when the principal cannot be crammed down.

💡 Pro Tip: Pull your original retail installment contract and note the exact date you signed it. The 910-day count generally runs from when the debt was incurred, and a few days can make a real difference.

Thing 3: Courts Have Disagreed About How Far the Rule Reaches

The hanging paragraph is brief, and courts nationwide have struggled with its ambiguities. A Missouri Law Review analysis surveys how courts have interpreted key terms, including what counts as a "purchase money security interest" and how to treat add-ons bundled into a car loan.

Negative Equity and Add-Ons

One common dispute involves negative equity rolled over from a trade-in. If you owed more on your old car than it was worth, a dealer may have added that shortfall to your new loan. Some courts once held that the negative equity portion was not purchase-money debt. Several federal appeals courts have disagreed, including the Fourth Circuit in In re Price, 562 F.3d 618 (4th Cir. 2009), which, applying state law, treated negative equity as part of the purchase-money obligation. Extended warranties, gap insurance, and service contracts may raise similar questions.

Surrendering the Vehicle

Courts have also split on what happens if you give the car back. Some early decisions held that surrendering a 910 vehicle fully satisfied the debt. Most federal appeals courts to address the issue, including the Fourth Circuit in Tidewater Finance Co. v. Kenney, 531 F.3d 312 (4th Cir. 2008), have held that surrendering a 910-day vehicle does not fully satisfy the debt, allowing the lender to pursue a deficiency claim as unsecured debt. The Fourth Circuit has clearly settled this question, and it is binding on bankruptcy courts in Baltimore, Maryland.

Thing 4: Timing Your Filing Can Change the Result

Since the rule turns on a specific day count, the date you file can matter a great deal. If you are close to day 910, waiting a short time might move your loan outside the window and make cramdown available. Waiting is not always possible, especially if repossession, garnishment, or foreclosure is imminent.

Filing triggers the automatic stay under 11 U.S.C. § 362, which generally halts collection efforts and repossession. The stay has limits. It may be shortened or unavailable if you had a prior case dismissed within the past year, and a lender can ask the court for relief. If your car has already been taken or a lender is threatening to take it, you may want to review your vehicle repossession rights in Baltimore alongside your bankruptcy options.

Weighing the Trade-Offs

Every timing decision involves trade-offs that depend on your finances. Delaying could allow more missed payments, late fees, or a repossession that becomes harder to reverse. A careful review of your loan date, arrears, and income may reveal which option better protects your transportation.

💡 Pro Tip: Do not take on a new car loan shortly before filing without discussing it first. New debt incurred right before bankruptcy can draw scrutiny from the trustee and creditors.

Thing 5: A Feasible Plan Still Matters Most

Even when the 910-day rule applies, many Baltimore drivers can still keep their cars through Chapter 13. The key is proposing a plan you can realistically afford for three to five years, depending on your income. Under 11 U.S.C. § 1325(a)(6), the court must find that you will be able to make all plan payments and comply with the plan.

Full disclosure is essential for building a plan that holds up to trustee and creditor scrutiny. Accurate figures for your income, expenses, and loan terms help show feasibility and protect your credibility with the court.

A Baltimore Chapter 13 filing may also protect co-signers. The co-debtor stay in 11 U.S.C. § 1301 generally limits collection against a co-signer on consumer debts while the case is pending. It ends if the case is closed, dismissed, or converted to Chapter 7 or 11, and a creditor may ask the court for relief.

Frequently Asked Questions

1. Does the 910-day rule apply to leased vehicles?

Generally, no, because a true lease is not a purchase-money loan. Leases are typically handled as unexpired leases under 11 U.S.C. § 365, which you may assume or reject. Some agreements labeled as leases may work as disguised sales under state law, so the document matters.

2. Can I lower my car loan interest rate if the 910-day rule applies?

In many cases, possibly yes. The hanging paragraph limits valuation, but courts may still apply a Till prime-plus interest rate to the secured claim. The rate a court approves depends on the circumstances.

3. What if I bought the car for work?

The rule generally covers only vehicles acquired for personal use. A car bought mainly for business may fall outside the rule. Mixed-use vehicles can be harder to classify, and commuting to a job is often treated as personal use.

4. Does refinancing restart the 910-day clock?

Refinancing can raise complicated questions about whether the new loan is still purchase-money debt. Some courts have found that refinancing may affect purchase-money status, while others look at the substance of the transaction. The answer is fact-dependent.

5. Will a Maryland exemption protect my car from the 910-day rule?

Generally, no, because exemptions and the 910-day rule address different issues. Maryland exemptions may protect your equity from unsecured creditors, while the hanging paragraph governs how a lender’s secured claim is treated.

Protecting Your Ride and Your Fresh Start

The 910 day rule Chapter 13 provisions can make a recent car purchase more costly to keep, but they do not automatically prevent you from keeping it. Timing, interest rates, negative equity, and plan feasibility can all affect how it plays out for you. Speaking with a Baltimore bankruptcy attorney can help you understand where your loan stands before you file.

If you are worried about losing your car or keeping up with payments, Sanchez Garrison & Associates, LLC is ready to talk through your options. Call (410) 734-2200 or schedule your consultation today to take the next step toward a manageable plan.

Disclaimer: This content is for informational purposes only and is not legal advice. Every case is unique, and results may vary. Consult an attorney about your specific circumstances.