“Cramdown” Under Chapter 13 Bankruptcy in Mankato, MN

Behm Law Group provides bankruptcy assistance for residents of the Mankato area.

When traveling somewhere, many people cram all sorts of necessaries in their suitcases. The idea is to compress space, yet take what you want. Under 11 U.S.C. Sec. 1322 and 1325, when applied to Chapter 13 bankruptcy cases, a cramdown of a vehicle debt conveys a similar meaning.

Let’s consider one example for folks in Mankato, MN. The bankruptcy attorneys at Behm Law Group, Ltd., would like you to imagine you take out a vehicle loan for $20,000.00 at 20% interest, and this loan becomes effective more than 910 days before filing for bankruptcy relief. At the time of the bankruptcy filing the vehicle is only worth $10,000.00. In a Chapter 13 bankruptcy case, you could cramdown the $20,000.00 debt to the present $10,000.00 value of the vehicle. In addition, you could cramdown the interest rate from 20% to 5%. Now, instead of paying the vehicle lender, you pay the Chapter 13 trustee the $10,000.00 at 5% interest. This means that you are no longer paying the vehicle lender directly.  Rather, the chapter 13 trustee pays the vehicle lender with the payments you make to the chapter 13 trustee but pursuant to the modified terms as denoted above.  At the conclusion of the Chapter 13 bankruptcy, you would get the vehicle title. You would have effectively crammed down or decreased the amount of your vehicle debt.

But, wait! Don’t rush out to buy a vehicle using Chapter 13 as a strategic maneuver just so you can decrease the amount of your vehicle payments, Mankato, Minnesota. The bankruptcy attorneys at Behm Law Group, Ltd., recognize there are stipulations for who can file for a Chapter 13 bankruptcy. You may or may not qualify. You would still need a source of income to make payments under Chapter 13.

A cramdown is just one feature of a Chapter 13 bankruptcy. Of course, Chapter 13 isn’t the only type of bankruptcy either. Mankato, MN, feel free to call the bankruptcy attorneys at Behm Law Group, Ltd., if you are experiencing financial difficulties. We’d be more than happy to discuss your options with you.