handshake

Chapter 13 Bankruptcy - What cannot be "crammed" down

Amounts paid on certain debts secured by assets can be reduced in a chapter 13 bankruptcy. The most common are:

1. Car loans entered into more than 910 days prior to the filing of a chapter 13 bankruptcy.

2. Second mortgages on homes where the home value is less than the debt owed on the first mortgage.

A reduction or “cram down” as it is commonly known is not available to reduce the following loans in chapter 13:

1. First Mortgages

2. If the creditor has a “purchase money security interest” in the property (money lent to buy the property in question:

a. loans for motor vehicles that were purchased for personal use within about 2.5 years of the filing date.

b. loans for any other property purchased within 1 year of the filing date.

For these items, the full amount of the debt has to be paid to the creditor through the plan in order to keep the property.

Categories