Can a primary residence qualify for a cram down during chapter 13 bankruptcy?
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I bought my first home with cash and a $300,000 mortgage. The property today is valued at $150,000. Can a primary residence qualify for a cram down during chapter 13 banrkputcy?
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Cram down is the mechanism by which a bankruptcy court can reduce the sum owed on a secured debt or one that is guaranteed by collateral. Debtors may avail themselves of this remedy in Chapter 13 bankruptcies. The cram down may be used on secured debts such as mortgages on investment property or on rentals and secured auto loans that were taken out 910 days before filing for bankruptcy. They are not permitted, however, for a debtor's primary residence. The court lowers the amount due on a first mortgage on an investment home, for instance, to the property's current market value, and eliminates the debt on a second mortgage. The debtor in a Chapter 13 proceeding would be responsible for the amount of the cram-down secured debt during the duration of the repayment plan.
Posted by Yara Zakharia on 13 May 2010
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