Terminology in the legal world can sometimes seem odd, and a Chapter 13 bankruptcy cram down certainly qualifies. So, what is cramdown in Chapter 13 bankruptcy in Michigan?
Having practiced as a Michigan Chapter 13 bankruptcy attorney for over two decades, I’ve worked on countless cases to leverage cram down for the benefit of clients. In this article, I’ll review what cramdown means, the impact on secured loans, and the steps in the bankruptcy process.
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FAQs About Cramdown in Chapter 13 Bankruptcy
The remaining unsecured portion of the debt may be discharged at the end of the repayment plan. This process is available only under specific conditions and applies to depreciated assets.
The rule primarily applies in Chapter 13 bankruptcy cases and helps individuals manage debts tied to depreciating assets. Certain exceptions, such as loans on primary residences, limit its application.
While cramdowns are more common, cram ups may be used when debtors seek to retain assets without reducing the principal owed. Both processes require court approval under bankruptcy law.
However, primary residence mortgages cannot typically be crammed down. The remaining unsecured portion of the debt may be discharged after completing the repayment plan, providing significant financial relief to debtors with depreciated assets.