Saving Property through the Cramdown Process
You may have heard of mortgages that are described as being ‘upside-down’ or ‘underwater,’ referring to loans in which the principal balance is larger than the value of the property it is secured by. This most frequently occurs with vehicles, as a car depreciates at a much steeper rate than housing, but the volatile nature of the housing market can easily put debtors in a situation where they owe far more on their mortgage than their home is worth. In the process of a Chapter 13 bankruptcy, the use of a “cramdown” is a process by which the court reduces the amount of your debt to match the value of the secured property, frequently allowing you to avoid selling the property in order to pay your debts.
At the Russell Van Beustring P.C., our legal team is dedicated to helping debtors find effective solutions for debt relief through the bankruptcy system and will work diligently to guide and advise you through the chapter 13 process in a manner which makes effective use of the available resources. To learn more about your rights and options for recovery, call our experienced Houston Chapter 13 bankruptcy attorneys today at 713-973-6650.
In order to reduce the power of cramdowns to excuse debt and prevent abuse of the bankruptcy system, Congress has passed several restrictions on the process, such as the following:
- In order to cram down a car loan you must have purchased the car no less than 910 days before filing for bankruptcy. This eliminates the potential for filing for bankruptcy immediately after purchasing a vehicle and still being permitted to cram down the loan.
- All other personal property follows a similar rule but with a 1 year minimum.
- Investment property loans can be crammed down, but the full value of the loan must be paid off in the three or five year repayment plan. This makes it very difficult for many debtors to retain investment property in a bankruptcy.
These restrictions are in place only to protect lenders and, in most instances, will not affect honest debtors.
If you are facing the possibility of losing your property in a Chapter 13 bankruptcy, you may be able to save some of your investments by cramming down loans with the assistance of a skilled attorney. For a free consultation to discuss the details of your case with an experienced Houston Chapter 13 cramdown lawyer, call us today at 713-973-6650.