Why Can’t I “Cram Down” My Mortgage in a Chapter 13?

13 Jul Why Can’t I “Cram Down” My Mortgage in a Chapter 13?

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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Peter Orville is a bankruptcy lawyer in Binghamton, located in the Southern Tier of New York. He is a member and New York co-chair of the National Association of Consumer Bankruptcy Attorneys.

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