Cramdowns in Bankruptcy
If a person is filing a Chapter 13 bankruptcy, also known as a reorganization bankruptcy, they are often seeking in part to retain most or all of their property, but with modified payment plans approved by the court. Chapter 13 has what is commonly referred to as a “cramdown” option for qualifying properties, which allow a person to reduce the principle of a secured debt down to the actual value of the collateral which is secured. For example, let’s say you are filing for Chapter 13 bankruptcy, and you own a car that is more than 910 days old. If, for example, you owe the creditor $20,000 on that car loan, but the car itself is only worth $9,000, you may use the “cramdown” method to reduce what you owe the creditor from $20,000 to $9,000, saving you as much as $11,000 and allowing you to retain that vehicle. At the end of your Chapter 13 bankruptcy plan, you will own that car outright, and without further debt. Cramdowns are also available on other eligible types of property. To explore this option further, please contact Attorney Timothy Heinle with our office for a free consultation.