A Chapter 13 bankruptcy allows debtors to adjust or reorganize their debt in certain ways that a Chapter 7 does not. A Chapter 13 allows debtors to repay mortgage arrearages in a Chapter 13 plan. A Chapter 13 also allows debtors who own collateral that is worth less than the corresponding loan balance to adjust or modify the terms of the loan in certain circumstances. This is more commonly known as a “cramdown” since the debtor is more or less forcing the creditor to accept the revised loan provisions.
- 1322(b)(1) of Title 11 (Bankruptcy Code) provides that a Chapter 13 repayment plan “ may modify the right of holders of secured claims, other than a claim secured only by a security interest in real property that is the debtor’s principal residence…” In cramming down a secured claim, the loan’s balance, interest rate and other terms may be modified, althoughcreditors always have the right to object.
The following types of property may be crammed down in a Chapter 13 bankruptcy: automobile loan, investment property mortgages, or other loans for items of personal property such as household goods, electronics, and furniture. It’s important to note that § 1322 of the Bankruptcy Code provides that a mortgage on a principal place of residence may not be crammed down by a debtor in a Chapter 13 (or Chapter 7) case, except in certain rare circumstances .
The bankruptcy court may confirm the debtor’s plan despite the objection of the secured creditor holding the claim. although the court will consider a creditor’s objection and the debtor’s plan may be modified due to the objection. Thus, if the present value of the future stream of payments in the chapter 13 plan pays the secured claim in full, the cram down provisions of the Bankruptcy Code are therefore satisfied. If you have more questions about cramdowns and Chapter 13 cases, please see future blogs or call our office for a free consultation and a bankruptcy case evaluation.
If you are suffering from financial hardship, assert your rights. Contact H. Lehman Franklin, P.C. today for a free consultation and case evaluation to determine whether bankruptcy is your best option currently or in the future. Lehman Franklin and Kimberly Ward offer valuable experience and expertise in Chapter 7 and Chapter 13 bankruptcy cases. Our office is located at 127 North Main Street in Statesboro, GA (30458). We proudly serve Bulloch County, as well as the surrounding counties of Chatham, Candler, Evans, Bryan, Effingham, Screven, and Jenkins. Contact our office by telephone at 912-764-9616, by email at email@example.com, or check us out online at hlfranklin.com. We’re available to meet your legal needs Monday through Friday from 8:30 AM until 5:30 PM.