We can put a stop to:

• Creditor threats and harassment
• Calls from bill collectors
• Wage garnishment
• Foreclosure
• Lawsuits
• IRS action

13 Example-Motor Vehicles

Chapter 13 cram down . In the case of an automobile suppose the debtor possesses a car worth $5,000.00 but there is $10,000.00 owed against it. Lets also suppose the debtor is running two, three, four months behind on their automobile payments and the car is about to get repossessed. Again the filing of the Chapter 13 case will immediately protect the debtor’s possession of the collateral and in the debtor’s plan the debtor is entitled to propose payments to the creditor for the current market value of that automobile without regard to the actual contractual balance.

Example. In this example, the debtor may propose a plan to pay the creditor the $5,000.00 that represents the current market value of the vehicle and to pay that to the creditor in installments over a period that usually is going to be 36 months. This is the secured value of the lien, and we call this process a “cram down”, because the secured claim has been “crammed down” to the current value of the collateral. The law does require that the debtor must pay some interest to the creditor. Interest will be paid on the secured claim to compensate the creditor for the value of the delay in collecting the current market value of the automobile. However, the interest rate is often reduced below what the contract rate called for.

Caveat: An important exception to the “cram down” was included with the bankruptcy amendments that took effect on October 17, 2005. Under the current law, the debtor may not force a “cram down” on a secured purchase money motor vehicle obligation that was incurred within 910 days prior to the bankruptcy filing. However, the cram down should still be effective on any non motor vehicle obligations, such as appliances and furniture.

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