While lawyers and judges are the ultimate legal experts, of course, I believe that every citizen should take the time to learn a little about law for several reasons. First, it is important to know your rights, and knowing them can come in handy if anyone ever accuses you of a crime you didn't commit or threatens you legally in another other way. Second, learning about your local, state, and federal laws can help you act as a better citizen. When election time comes around, you can then truly understand ever change in law being proposed by a candidate and whether it benefits society or not. I plan to share posts about law topics explained in plain English on my new blog, so you can come back often to sharpen your legal knowledge!
Nearly everyone falls behind with their bills sometimes, especially when illness strikes and they are unable to work or they unexpectedly lose their job. Although it can feel like the end of the world and leave you frustrated and embarrassed, financial counseling and creative budgeting may be able to save the day. But when your debts continue to pile up and you face losing your home and vehicle, it may be time to consider bankruptcy. Filing chapter 13 bankruptcy may save your your home and vehicle by cramming down the car loan and removing junior liens on your home.
What is a cram down?
A cram down applies to loans or property that is considered a secured debt. This means someone, like the bank, has an interest in your property and can repossess it if you fail to make the agreed upon payments. Cramming down the loan means that you can reduce the principle owed and pay the actual value of the property. For example, if you owe $15,000 on a vehicle loan, but the current value of the vehicle is only $7,000, you may be able to cram down the loan and pay the $7,000. This does not apply to home loans, but there are other remedies for that.
Cram Down Exceptions:
What about my mortgage?
If you are facing foreclosure, you may be able to keep your house if you currently have a source of income to allow you to make payments on the delinquent amount and keep up with future payments. You may be able to reduce the mortgage debt by removing junior liens on your home. According to NOLO Law for All, a junior lien refers to second and third mortgages or home equity loans. Your bankruptcy attorney can help you determine whether you can reduce you mortgage debt by stripping junior loans. He may be able to secure further ways to reduce your home loan debt.
How does it all work?
Your attorney will work with you and your creditors to create a chapter 13 plan.This will include which debts you are obligated to pay, the amount, and the due date of the payment. It will also include any unsecured debts that you are obligated to pay. You must make the payments to a bankruptcy trustee on time every month for three to five years before your bankruptcy will be discharged. You will not lose your home or vehicle as long as you keep up-to-date with the payments.
What if I can't make the payments?
Unexpected events sometimes affect your ability to make the agreed upon payments in your chapter 13 plan. If you find yourself unable to make the payments, your attorney can ask the court to modify the terms of your plan. You will need to explain why you need to reduce your payment amount. If your plan includes unsecured debts, like credit card debt, you may be able to reduce the payments without consequences. However, if your plan contains only secured property, you may need to forfeit all or part of your property. For example, you may be able to forfeit your vehicle and continue to make payments on your home.
If you are struggling to meet your financial obligations and are facing losing your home or vehicle, contact a bankruptcy attorney to discuss your options. You may be pleasantly surprised to learn that you can claim bankruptcy and keep both your car and your home.