It’s an interesting expression – cram down, yet it is actually used in relation to a Chapter 13 Bankruptcy petition and a secured car loan. A Chapter 13 petition allows the debtor to propose a payment scheme that would pay off their debts over 3-5 years, particularly if some debts where discharged. Car loans are interesting and are treated a little differently.

If you have a car loan that is more than 910 days old then you may be entitled to use the cram down method to reduce your debt. This requires a current fair assessment of the car’s worth at the time you apply for the Chapter 13 petition. If the amount you owe is more than the market price then you may be able to force the credit provider into accepting the new value. This means the value of the loan is reduced to what the current market value is.

This is known as cramming down the price of the vehicle. Be careful if you decide to use this technique since lenders will often dispute the valuation. This has been known to lead to lengthy and expensive law suits.These law suits would only add to the cost at a time when you don’t need more money issues.

There is a second bonus to cramming your car loan. Not only can you reduce your payments, but you can extend the time to pay out the debt. Payments under a Chapter 13 bankruptcy can be scheduled for up to five years (three years is the norm).  Chapter 13 petitions can be tricky. You should get an expert in this field to help you through the process to enable you to settle your affairs quickly and with the smallest disruption to your life.

Related posts:

  1. The Steps To A Successful Chapter 13 Bankruptcy Filing