The audience has been taught to regard “bankruptcy” as a terrifying tragedy. It wreaks havoc on your finances and, your credit, and leads families to lose all they own. Bankruptcy is a huge choice that should not be made lightly, yet it has helped many people achieve a serious economic start.
Businesses can file for bankruptcy in a variety of ways, but people only have 2 choices: chapter 7 bankruptcy Victorville and Chapter 13. A liquidation bankruptcy, often known as Chapter 7, is one of the most common types of bankruptcy.
Because filers frequently get to maintain the majority of their assets, Chapter 13 is known as debt restructuring. Each method has advantages and disadvantages, and you should not proceed with either without first consulting with experienced chapter 7 and chapter 13 lawyers in Victorville.
The cramdown, or cram-down, an option is one potential advantage of Chapter 13 bankruptcy. Many people confuse a bankruptcy reorganization with debt settlement, but the two are not the same thing.
The method by which a debtor successfully decreases the amount owing on certain secured obligations is known as a cramdown. A secured debt is backed up by something real. A mortgage loan, which is legally a claim put on your home by your mortgage lender, is the most popular sort of secured debt.
When you cram down existing loans in Chapter 13 bankruptcy, you tell your creditors that you’ll pay them fair market value for your valuables (assets that secure the debts)—even if the overall amount you owe is greater than that.
Creditors seldom accept this without a court order, which is why filing for bankruptcy is your best bet for a cramdown.
The majority of people who file for Chapter 13 bankruptcy utilize cramdowns to pay down their vehicle debts. It’s not unusual for someone to owe a lot more on a car than they’d collect if they sold it for fair market value to someone else. In these cases, doing a cramdown is a far better deal for automobile owners.
However, there are limitations. Before requesting a cramdown, one must possess an automobile for at least 910 days; this discourages individuals from buying cars and then declaring Chapter 13 bankruptcy. Furthermore, debtors are not allowed to cram down their home loans.
Conclusion
A cramdown is an alternative for some bankruptcy filers who seek to reduce principal and interest payments on specific assets. Almost every filer would find that appealing in theory. A cramdown, on the other hand, is only accessible under particular circumstances. You should not file for bankruptcy just because of the possibility of cramdowns.