Chapter 13 bankruptcy cram down. Bankruptcy lawyers have come across this issue many times. People filing a Chapter 13 bankruptcy ask about cram down. They have heard about it. Many are not certain what it means. So what is a cram down? How does it relate to the filing of a Chapter 13 bankruptcy case? A cram down relates to mortgages and other liens. The process of a cram down relates to people who are inside a Chapter 13 bankruptcy plan. In a Chapter 13 bankruptcy, debtors make payments to a trustee to pay the claims in their case. A cram down may reduce the amount you have to pay to satisfy liens that have been placed on your property. The cram down works by reducing the principal you owe to match the current value of your property. It can also reduce your interest rate to reflect current market rates. This is really useful to people who bought when interest rates were high. The great thing when you are in a Chapter 13 bankruptcy, the creditor does not have to agree to the cram down. You may get the cram down even over the creditor’s objection. The cram down is mostly used for real estate that is not the debtor’s primary residence. It can also be used on motor vehicles. Providing you have owed the motor vehicle more than 910 days. Cram down cannot be used on your primary residence. Lien stripping could be used on your primary residence. Lien stripping is discussed on a separate blog on this site. So how does cram down work? First, the debtor needs to obtain an appraisal on the property to prove the value is less than the debt owed. Then, your bankruptcy attorney will file a motion with the bankruptcy court to reduce the debt. The creditor is then given the chance to object to the cram down. If the creditor does not object and the cram down is granted, the secured portion of the debt is reduced to the appraisal value. The balance on the debt becomes unsecured. That portion will be paid with debts such as credit card bills. Unsecured debts are usually only paid a portion in a Chapter 13 bankruptcy case. If the creditor does object, the creditor must do their own appraisal. If the appraisal differs from your appraisal, it can be resolved through an agreement with the creditor. If it cannot be resolved, the bankruptcy judge in your case will then make the decision. A cram down can really help you shed debt in your Chapter 13 bankruptcy case. Talk to an experienced bankruptcy lawyer. Ask about cram down. See how it can make your Chapter 13 bankruptcy a lot smoother than you thought it could be.
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