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Consumers who contemplate becoming Chapter 13 bankruptcy debtors should consider the concept of a “cram down” of property under the Bankruptcy Code. Cram downs require an analysis of certain of a secured claim and the application of relevant bankruptcy law. Theron Morrison and the team of bankruptcy attorneys at the Morrison Law Group have helped countless Chapter 13 debtors make this analysis and benefit from a cram down.
What Is A Cram Down?
The Bankruptcy Code permits the modification of the rights of those who hold secured claims, except for claims secured by a security interest in real property which is the debtor’s principal residence. In simpler terms, § 1322(b)(1) of Title 11 permits debtors to modify or cram down the treatment of a claim.
Typically, this means that the loan balance and interest rate of a creditor’s secured claim may be reduced, therefore, saving the debtor money. A debtor may also cram down or modify the time to pay a claim for the length of a chapter 13 plan.
Thus, a chapter 13 plan that crams down a secured claim modifies the contract underlying the debt and formulates new payment provisions for key contract terms such as the interest rate and length of the loan.
A debtor may cram down property despite the objection of the secured creditor. The initial use of the term “cram down” described a court’s ability to “cram down” a plan over the objection of creditors. New England Coal & Coke Co. v. Rutland R. Co., 143 F.2d 179, 189 n.36 (2d Cir. 1944).
As specifically stated in § 1322 of the Bankruptcy Code, a chapter 13 debtor may not cram down a mortgage on a principal place of residence. A Chapter 13 bankruptcy debtor may use the cram down provisions of § 1322 to modify claims for automobiles, investment property, or other items of personal property such as furniture, electronics, and household goods. More about cramming down an automobile in tomorrow’s blog.
Theron Morrison has helped 8,000 people file bankruptcy and gain a fresh start. He has helped over 20,000 Utah residents deal with all types of financial difficulties caused by various severe and tragic events. Talk to the Morrison Law Group about your Chapter 7 or Chapter 13 bankruptcy options. Call 801.456.9933 today to schedule a FREE consultation. We have locations in Ogden, Logan, Sandy, and St. George to serve the residents of the counties of Weber, Cache, Salt Lake, Utah, Morgan, Davis, Washington, and surrounding areas.