Auto financing glossary

The terms that decide subprime car deals, defined in plain language. Most of these are words you will first hear at a dealership desk, in the middle of a transaction, with no one explaining them.

341 Meeting of Creditors — 11 U.S.C. § 341(a) requires the meeting of creditors; Fed. R. Bankr. P. 2003(a) sets it 21-40 days out in Chapter 7, 21-35 in Chapter 12, 21-50 in Chapter 13.
Adequate Protection Payments — Adequate protection payments under 11 U.S.C. § 1326(a)(1)(C) pay a car lender directly for value lost before a Chapter 13 plan is confirmed, within 30 days.
Buy-Here-Pay-Here — A buy-here-pay-here dealer originates and holds its own loan. Subprime BHPH rates average 25.39%, versus 14.60% at traditional lenders.
Chapter 13 Trustee — The Chapter 13 trustee, appointed under 11 U.S.C. § 1302, reviews the plan and requests like a car loan; fees are capped at 10% under § 586(e)(1)(B)(i).
Conversion — Chapter 7 converts to 13 under 11 U.S.C. § 706; Chapter 13 converts to 7 under § 1307 — only one of the two requires a motion, not just notice.
Cramdown — Cramdown splits a secured claim to its value under 11 U.S.C. § 506(a), but § 1325(a)'s hanging paragraph blocks it on car loans under 910 days old.
Cross-Collateralization — A cross-collateralization clause lets one piece of collateral secure other debts to the same credit union; a 2020 bankruptcy ruling upheld it across 3 loans.
Deficiency Balance — A deficiency balance is what's owed after a repossessed car resells for less than the loan; CFPB data show 94% of 2018-2022 resales left one.
Discharge vs. Dismissal — A discharge under 11 U.S.C. § 727 or § 1328 ends personal liability for debts; a dismissal under § 349 restores debts, liens, and the pre-filing status quo.
Exemption — Under 11 U.S.C. § 522, an exemption shields property from creditors; the federal motor-vehicle figure is $5,025, reset every 3 years under § 104.
Means Test — The Chapter 7 means test under 11 U.S.C. § 707(b)(2) compares income to the state median; the same comparison sets a Chapter 13 plan at 3 or 5 years.
Motion to Incur Debt — A motion to incur debt asks a Chapter 13 trustee or court to approve new debt like a car loan under 11 U.S.C. §§ 1305, 1322, and 1327.
Negative Equity — Negative equity means owing more than a car is worth. CFPB data found it in 11.7% of 2018-2022 auto loans, often rolled into the next one.
No-Asset Case — A no-asset Chapter 7 is one where the trustee's § 704(a)(1) review finds nothing to sell; Chapter 7 was 356,724 of 574,314 CY2025 filings.
Payment-to-Income Ratio — PTI is a car payment divided by gross monthly income — e.g., $531 against $6,000 is 8.9%. No regulator publishes a maximum PTI for auto loans.
Plan Confirmation — Plan confirmation under 11 U.S.C. § 1325 is the court's approval of a Chapter 13 plan; § 1327 then binds the debtor and every creditor to it.
Purchase-Money Security Interest — A purchase-money security interest secures the debt used to buy the collateral itself — 1 of 3 conditions blocking Chapter 13 cramdown under § 1325(a).
Reaffirmation Agreement — Under 11 U.S.C. § 524(c), a reaffirmation agreement must be made before discharge and filed with the court; rescission runs to discharge or 60 days from filing.
Redemption — Redemption under 11 U.S.C. § 722 lets a Chapter 7 filer keep a car by paying the lien in one lump sum, a rule BAPCPA tightened in 2005.
Spot Delivery — Spot delivery lets you drive home before financing is final. The FTC's first case over the yo-yo callback that can follow settled for $3.6M in 2017.
Statement of Intention — A Chapter 7 statement of intention is due under 11 U.S.C. § 521(a)(2) within 30 days of filing; a financed car then faces a 45-day deadline to act.
The 910-Day Rule — BAPCPA's hanging paragraph in 11 U.S.C. § 1325(a) blocks cramdown on a car loan under 910 days old with a purchase-money interest for personal use.
The Automatic Stay — 11 U.S.C. § 362's automatic stay halts most collection when a petition is filed. It has 29 exceptions and can shrink to 30 days for a repeat filer.
VantageScore vs. FICO — Both models score 300 to 850, but a 580 lands in FICO's Fair tier and VantageScore's Subprime tier — a 19.42% used-loan APR row on this site's table.