Chapter 13 Bankruptcy Cram Down
Although a Chapter 13 bankruptcy does not discharge debts outright, it provides many other benefits. One of the most useful provisions is the Chapter 13 cramdown. In the simplest terms, a cramdown reduces what you still owe on a secured debt such as a car loan or rental property mortgage.
At Atlas Consumer Law, our philosophy is to make full use - smart and strategic use - of the decision to file bankruptcy. We look at your case from every angle to solve debt problems, including the dilemma of owing more than your car or investment property is worth.
Our experienced Chicago bankruptcy lawyers represent individuals and couples throughout Illinois. Contact us online or by telephone at (312) 313-1613.
Investment Property Cramdown: Reduce the Principal
Bankruptcy can provide relief if you have negative equity in a duplex, apartment building or other investment property. Chapter 13 cramdown reduces the principal to reflect current market value.
For example, if you took out a loan for $100,000 to buy the property and the actual market value has plummeted to $75,000, the lender can be forced to adjust the principal and the loan terms accordingly. Our attorneys have extensive experience in adversary proceedings, when lenders challenge valuations or the cramdown itself.
Auto Loan Cramdown in Chapter 13 Bankruptcy
Vehicles often present a problem in bankruptcy. You may have to choose between surrendering your mode of transportation and continuing payments you can't afford to retain a negative equity vehicle. The bankruptcy trustee has authority to "cram down" your loan to the current value. The cramdown may be in the form of lower monthly payments or fewer payments to pay it off. This is a powerful and intended use of the Bankruptcy Code.
You must meet certain criteria to invoke the cramdown provision: (a) you have owned the car for at least 910 days (2 1/2 years) and (b) your remaining car payments exceed the vehicle's present market value. Cramdown is available only under Chapter 13 and Chapter 11.
Fred* drives a 2009 Audi sedan and Ginger* a 2010 Volvo SUV. They are filing for Chapter 13 bankruptcy because they maxed out their credit cards and fell behind on the mortgage after a business dissolution. Fred has 24 remaining car payments of $550 and qualifies for a cramdown to payments of $350 for 18 months. Ginger's loan is too recent to qualify for relief.
*Fred and Ginger are fictitious characters created for the purpose of illustrating bankruptcy scenarios.
The Chicago bankruptcy attorneys of Atlas Consumer Law can maximize the benefits of Chapter 13. Contact us online or call (312) 313-1613 to arrange a consultation.