Another name for Chapter 13 bankruptcy is wage earner bankruptcy. This is because it is primarily used by individuals who earn a regular income. So, they may still be able and willing to pay off their outstanding debts over time. Yet, they may just require the help of a bankruptcy filing to reorganize them through a three- to five-year repayment plan. This is not to say, though, that you cannot reduce the amount of your outstanding debts in the process. This may be made possible by a bankruptcy cramdown. With that being said, please follow along to find out what a bankruptcy cramdown is and how a proficient Rockland County Chapter 13 bankruptcy attorney at The Law Offices of Allen A. Kolber, Esq. can help you take advantage of one, if most appropriate.
What is a Chapter 13 bankruptcy cramdown?
In its simplest terms, a Chapter 13 bankruptcy cramdown is an initiative that may allow you to reduce the principal balance of a secured debt to the value of the property it is secured by. To take this a step back, a secured debt is a type of debt that involves a lender with a secure interest in the property. So, a lender may repossess the property at any time you fail to keep up with your required loan repayments.
Namely, during your Chapter 13 bankruptcy proceedings, you may be eligible to cram down your car loan, investment property mortgages, and other personal property aside from real estate. Please notice that you may only cram down investment property mortgages and not a mortgage for your principal place of residence.
What are the advantages and disadvantages of a cramdown?
As it may already be apparent, the key advantage to a bankruptcy cramdown is reducing the amount you owe on an outstanding debt. But in addition, this may allow you to lessen the interest rate on your loan, all while stretching your payment plan for up to five years. Overall, this may make it more manageable to pay back what you still owe, especially on a month-to-month basis.
While this may all seem great, you must be aware of the potential disadvantages of a bankruptcy cramdown before petitioning for one. Specifically, there may be imposed restrictions for cramming down your most recent purchases. For example, to cram down your car loan, you must have purchased your car at least 910 days (i.e., two and a half years) before you submitted your Chapter 13 bankruptcy petition. For personal property, this restriction is set at 365 days (i.e., one year).
As a consumer considering your bankruptcy options, there is no one better you can turn to than a talented Rockland County bankruptcy attorney from our firm. So please, call us at The Law Offices of Allen A. Kolber, Esq. as soon as possible.
