What’s a “cram down?” Can a “cram down” help you? In a Chapter 13 bankruptcy, a Utah lawyer can use a, “cram down” to reduce the principal balance of debt to value the property is secured by. By using a Chapter 13 cram down, you may be able to save your investment in your car, real estate or other properties.
Can all debts be “crammed?”
You are only allowed to cram certain secured debts and only in certain circumstances. A debt is generally secured when then lender has a secured interest into your property and can repossess it if you default on your loan payment. Typically, home and car loans are secured, and sometimes others. In a Chapter 13 bankruptcy, a Utah lawyer may be able to cram down your auto loan, loans on household goods such as furnishings, appliances and technology. However, you cannot cram down a mortgage on your principal place of residence.
How can I sign up?
A Utah lawyer may also be able to use a Chapter 13 bankruptcy to cram down a client’s car loans so we will use a car loan cram down as an example.
If you own a car worth $8,000 but you owe $16,000 then you could possibly cram down your loan to $8,000 through your Chapter 13 repayment plan. The remaining $8,000 of the balance would then be lumped in with your other unsecured debts (like credit cards). As for the unsecured debt, you’ll likely only pay a portion of it and you’ll end up owning your car free and clear after you make all of the payments associated with your bankruptcy plan.
Other benefits of a Cram down
If a lawyer in Salt Lake City crams down your loans through a Chapter 13 bankruptcy you may also have your interest rate reduced and potentially extend your repayment period to lower your monthly obligations. The interest rate paid to secured creditors is generally determined by the bankruptcy court, and if your bankruptcy lawyer in Salt Lake City makes a strong case to extend the repayment periods, the court is likely to do so. Extending the repayment period generally results in lower monthly payments.
Restrictions for a Cram down
Of course there are legal restrictions on a cram down, and a lawyer in Salt Lake City can provide more information about your specific situation. Generally, the restrictions prohibit people from cramming down very recent purchases. For example, for an auto loan you must have owned the car for 910 days prior to filing the bankruptcy. In the case of most personal property there is a one-year rule for any item that you wish to cram down.
Additionally, most repayment plans require that the crammed loans be paid within 3-5 years of the bankruptcy. Understandably, that makes cramming down mortgages on investment properties quite difficult as there are not many people who can pay off a mortgage in that amount of time. There are also restrictions on the type of collateral that being used to secure the property being crammed. Again, for specific questions about your situation, contact a bankruptcy lawyer in Salt Lake City.
Shumway Van & Hansen has multiple bankruptcy attorneys that are available to answer questions and are happy to do so in a free initial consultation. A free consultation can often times be scheduled within the day. For more information please continue to look at www.shumwayvan.com or stop by any of our offices which are located at 8985 S. Eastern Ave, Suite 100, Las Vegas Nevada 89123 or 8 East Broadway, Suite 550, Salt Lake City, Utah 84111. We look forward to hearing from you soon.