Chapter 13 bankruptcy allows thousands of people to reorganize their debt so they can make serious progress towards paying it off. In most cases, petitioners are able to hold onto most, or all, of their assets. However, some cases are different, and collateral property, such as a home or car, may be vulnerable to repossession. In those cases, it may still be possible to save your property by using cramdowns.
What Are Cramdowns?
Cramdowns in Chapter 13 bankruptcy are used to lower the principle balance of a certain debt to equal the value of the collateral property. This will usually prevent the creditor from taking the asset, allowing you to continue paying off a portion of the debt and keep your car or other property.
Benefits of Cramdowns in Chapter 13 Bankruptcy
Cramming down debts in Chapter 13 bankruptcy can help you to lower monthly payments, and stretch them out over a longer period. Also, interest rates may be reduced significantly after cramming down your secured debts. Since Chapter 13 repayment plans tend to last three to five years, you may even be able to discharge any remaining debt after the payment plan has ended.
What Debts Can I Cram Down in Chapter 13?
You may not be able to cram down all of your secured debt in Chapter 13 bankruptcy. The most common forms of secured debt include your home and your car. You are generally allowed to cram down your car loan, but cramming down the mortgage on your primary residence is often restricted. Investment property and other secured debts can usually be crammed down as well.
With years of experience, the Manalapan bankruptcy lawyers at Garland & Mason, LLC can help you find the best solutions to help you minimize or eliminate your debt.