How to Cram Down a Car Loan Under Chapter 13

There are varying definitions for the colloquialism “cram down.”  The most common definition of the expression “cram down” in a bankruptcy action arose in situations where a bankruptcy judge simply wrote off all or part of a debt that a valid creditor had against the individual declaring bankruptcy.  The judge’s order was referred to as something to “cram down” the creditor’s throat because the debt was written off and there was nothing he could do about it.  A bankruptcy judge may only take action of that kind when he has reviewed the bankruptcy case and determined that based on the facts of that case it is in the best interest of all parties concerned, including all creditors, that some of the debt be simply written off entirely.  The key to the validity of this type of judicial action is that “it is taken in the best interests of all concerned” by that particular bankruptcy case.  Obviously, a “cram down” debt write off is a last ditch effort to try to approve a financial plan where some portion of the debt however minimal would be reasonably paid down or recouped in some manner by at least some of the creditors. 

Chapter Thirteen Cram Down

The method of getting a “cram down” write off of a car loan through a Chapter Thirteen bankruptcy is threefold.

1. Determine if the debtor meets the eligibility requirements for filing for Chapter Thirteen bankruptcy
2. Draft a debt repayment plan that does not allow for the repayment of the automobile loan
3. Get a bankruptcy judge to confirm your debt repayment which does not include the repayment of the automobile loan debt.

If the plan is approved and confirmed by your bankruptcy judge then the auto debt is written off and there is nothing the creditor can do at that point to get his money.  In most cases the auto creditor will have already formally objected to the repayment plan at issue.  However, the main fact which the bankruptcy judge wants to know is whether or not the repayment plan being considered is one that the debtor can if fact meet financially based on his income and expected future income.  The judge will try to see that as many debts are repaid as possible based on the debtor's income.  If the repayment plan is not realistic the entire bankruptcy case may be summarily dismissed, converted to a Chapter Seven bankruptcy or the judge may allow the debtor to modify his repayment plan and schedule another repayment plan confirmation hearing.

Getting Legal Help

Having a bankruptcy lawyer to guide and assist a debtor in trouble through the bankruptcy process is the best and most reasonable method of surviving this type of life setback in one piece.  This is not the time to try to “do it yourself.”  You’re already in enough hot water.