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, Discharge, What Can and Cannot Be Forgiven, Foreclosure Issues, General Bankruptcy Information, Mortgages
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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