Save Money on Your Car Payments, Stop a Repo - What Is a Cram Down?
Feb. 8, 2021
Cram Downs on Cars and Other Vehicles:
If you are presently making payments, on cars or other vehicles, we may be able to save you a lot of money by filing a Chapter 13. For example, if you owe $10,000 on your car and the retail book value is only $7,000, you may be able to reduce your car loan debt to $7,000 and substantially reduce your car payments. If your car has damage or needs repairs or has high mileage or other problems, these issues could reduce the value even below the $7,000 book value, and maybe the car is only worth $5,000. Therefore, in this example, you would only have to pay $5,000 as the cram down value of the vehicle. The less your car is worth, the more money you will save.
Interest is required on cram downs. You can often reduce your interest rate on a cram down to only about 6% in many cases, even if your contract rate of interest is much higher. Some of our clients were actually paying 20% or more on their annual interest rates, before we got them an interest rate cram down.
Keep in mind that the finance company does have the right to object to a cram down. As long as the cram down figure is based on the retail value of the car, and you qualify for the cram down as stated below, you pretty much have an absolute right to a cram down in a Chapter 13 bankruptcy and to reduce your interest rate to about 6%. Even if you are not eligible for a cram down based on the car value, we might be able to reduce your interest rate on your car loan if you are paying more than 7%, so please be sure to discuss these situations with us.
There is one catch. To qualify for a cram down based on the car value you usually must have owned the car for at least 910 days (about 2 ½ years) before you can do the cram down. There may be another way to cram down your vehicle, however, even if you haven't owned it for 910 days, so if you discuss your situation with us, we might be able to get you a cram down based on the vehicle value even if you haven't owned it for 910 days.
If your vehicle is in jeopardy of repossession, by filing a chapter 13 we can usually stop the repossession efforts in their tracks, and we might be able to save you a lot of money on your interest rate and the payoff on your vehicle. The legal issues can get to be a little tricky sometimes, so if you contact us at 856 696 8300, we will be happy to discuss your situation in detail and answer your questions.
Here's another point. Even if you didn't own the car for 910 days, you can usually reduce the interest rate to about 6%. Some of our clients were actually paying 20% or more on their annual interest rates, before we got them an interest rate cram down. Getting your interest rate reduced might save you thousands of dollars over the course of you car loan.
Cram Downs on Mortgages:
There are also times when you can cram down the second mortgage on your house to zero. This means that you can totally wipe out your second mortgage. This can only be accomplished in limited circumstances. We need to see a copy of your mortgage documents before we can advise you whether or not a cram down is possible on your home mortgage. You can also cram down a mortgage on an investment property or rental property that you own, if the property is worth less than your balance due to payoff the mortgage.
Cram Downs on Personal Property:
Cram downs are also permitted on personal property. For example, if you have financed furniture, a vacuum cleaner, or other items of personal property, you may normally cram down such an item as long as the item is reasonably necessary to the successful completion of your bankruptcy. If you owe more than the property is now worth, you only pay what it is worth.
If we believe that you qualify for a cram down, we will explore the various options and alternatives that you have. This is a great way to legally save a lot of money through the bankruptcy process.