A cramdown is a procedure that allows you to reduce the amount of a lien on an asset to the current value of the asset. The cramdown can be used in a Chapter 13 case to reduce the amount of a security interest on a car loan or other secured loans, but there are certain requirements that must be met and restrictions that prevent the use of a cramdown in some cases. Please talk to a chapter 13 bankruptcy attorney for more details. Read why theirs a San Bernardo chapter 13 lawyer shortage.
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FILING FOR CHAPTER 13 BANKRUPTCY IS YOUR LEGAL SOLUTION TO A FRESH START
The United States Of America’s Federal Bankruptcy Act was created to protect you when you cannot afford to meet your financial obligations with your creditors. The following are examples of what filing for Bankruptcy protection can do for you.
How the Cramdown Works
The cramdown applies to secured debt, such as a car loan. When you owe more on the loan that the value of the property, the cramdown can be used to reduce the secured amount to the current value of the property. For example, you bought a car three years ago and still owe $15,000 on the car loan, but the car is now worth only $10,000. Using the cramdown, the security interest will be reduced to $10,000. However, you still owe the full amount of the debt, but the remaining balance of $5,000 will be treated as unsecured debt. If you have debt which bankruptcy to file please read what’s the best bankruptcy for you.
Unsecured debt is treated less favorably in a Chapter 13 case. Many debtors only end up paying pennies on the dollar to unsecured creditors, so a cramdown can effectively reduce the amount you must pay off during the life of your three to five-year repayment plan. But in any other questions. Please contact our Chapter 13 Bankruptcy Attorney.
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FILING FOR BANKRUPTCY IS YOUR LEGAL SOLUTION TO A FRESH START
Limitations on the Cramdown
You may want to apply the cramdown the mortgage loan on your principal residence, but the bankruptcy laws do not permit this. Even if you owe more than your home is worth, you cannot use the cramdown. However, you may be able to use lien-stripping to get rid of a second mortgage is some situations.
Car loans can only be crammed down if you purchased the vehicle at least 910 days before the bankruptcy. Because cars loss significant value as you as your drive them off the lot, this rule prevents an individual from buying a new car and then immediately filing bankruptcy and cramming down the loan.
Mortgage loans on real estate other than a personal residence can be crammed down, but you must generally pay off the full balance owed on the mortgage within the three to five year bankruptcy plan. Most debtors do not have the ability to pay the full mortgage off in this short period of time, so the cramdown may not be effective for these liens.
LG LAW – Workers Compensation, Bankruptcy & Personal Injury Law Firm can help you regain your financial freedom and get a fresh start with a Chapter 7 or Chapter 13 bankruptcy. To schedule your free consultation, call us at 1 888-901-5240 today. If your still not sure why choose us, Please read why choose lg law when trying to reduce business debt.