Why Can’t I “Cram Down” My Mortgage in a Chapter 13?
By Peter Orville, Attorney at Law on Jul 13, 2007 in Chapter 13 Bankruptcy, Debts Not Dischargeable, General Bankruptcy Information
That is a very good question recently asked of me by a client. She could “cram down” her car, her furniture, and even a mortgage on income property, but not a mortgage on her residence. A “cram down” is where a chapter 13 debtor pays only the actual value of some property securing a loan, and not the entire balance due to the creditor.
In the current economic climate, where the abuses of the sub-prime mortgage lenders have received much deserved publicity, why should these lenders be protected in the bankruptcy law? If a person’s mortgage balance greatly exceeds the value of their home, the creditor would get, at best, only the value of the home in a foreclosure procedure. Why should they get paid the excess?
The “anti-modification of residential mortgages” provisions in the bankruptcy law should be re-examined by Congress.
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