What is a “Cram Down” on a Motor vehicle in Chapter 13 Bankruptcy?

Posted by Kevin Ryan | Jul 07, 2016 | 0 Comments

A cram down is a provision in a Chapter 13 Plan that provides for payment of only the fair market value of the vehicle securing an auto loan to the secured creditor.  This can only be done if the age of the loan is more than 910 days old on the date the case is filed.   The balance on a crammed down auto loan is discharged once the Debtor completes the Plan.

The 910 Rule for Cramdown 

There are some legal and practical limitations to the cram down.  Most obvious is that the loan has to be at least 2 ½ years old ( or 910 days) on the date the case is filed.  Also, the Debtor or co-Debtor(s) on the account must be eligible under 11 U.S. Code Section 1328 to receive a Discharge in the case.  If the Debtor has prior case filings under Chapter 7, or a prior Ch 13 case where a discharge was received within certain lookback time periods, then in that situation the vehicle loan cannot be “crammed down” even if it is older than 910 days on the date the case is filed.  They key issue here is whether the Debtor is eligible to receive a Discharge in the case.  A “dischargeable” Chapter 13 case is one where the Debtor is not required to pay all of his or her general unsecured debts during the administration of the Plan.

The Means Test Effect on Cramdown

Another issue which may get in the way of “cramming down” a car loan is a case where by reason of the Chapter 13 “Means Test” ( Official Bankruptcy Form 22(c) ) the Debtor is required to pay 100% of the Debt back to general unsecured creditors.   In this type of case, the loan can still be bifurcated into “secured” and “unsecured,” with interest being required only on the secured portion of the debt.  The auto loan would still need to be more than 910 days old in this situation, and the creditor can claim WSJ Prime Rate plus 1-3 points for the interest rate  ( Where Prime Rate is 3.5% on date of Filing, interest rate on the secured part of the claim inside the plan would be between 4.5% to 6.5% as negotiated with the creditor, usually via their legal counsel.  

If you have further questions about whether your auto loan can be “crammed down” in a Chapter 13 case, please do not hesitate to contact Bankruptcy Attorney Kevin Ryan at 251-431-6012 or by sending an email to him through this website.

About the Author

Kevin Ryan

"I'll never be the kind of attorney your creditors want me to be. I'll always be the kind of attorney you NEED me to be. Call me. I'll BE there for you. And I'll make them go away."  -Kevin Ryan, Attorney at Law Kevin Ryan is a graduate of the College of Wooster and the Cleveland Marshall College of Law. He is admitted to practice before all Alabama State Courts, the United States District Court for the Southern District of Alabama, and the United States Bankruptcy Court for the Southern District of Alabama. The United States Bankruptcy Court is a part of the United States District Court. Since 1998, Mr. Ryan has represented thousands of individual clients in bankruptcy, criminal, divorce, probate, personal injury, and real estate matters.  Attorney Ryan is also a licensed real estate agent in Alabama.  He handles  Bank-owned properties, short sales, and conventional sales in addition to conventional real estate listings.   This wide range of experience enables Attorney Ryan to take a wider look at your legal matter. It is important to consult with an attorney who can see from experience how other legal issues may affect your situation, and advise you accordingly. Personal Info Kevin Ryan is a member of First Baptist Church in Silverhill, Alabama. He resides in Silverhill with his wife Jessica and their three children. Committed to helping our Clients achieve a fresh financial start Our practice focuses primarily on consumer bankruptcy matters under Chapter 7 and Chapter 13 of the United States Bankruptcy Code.  Our law practice also includes matters where bankruptcy litigation, appellate work, or involvement in civil lawsuits is needed by a client.     No representation is made that the quality of any of these legal services is of higher quality than another attorney or law firm.   The United States Bankruptcy Code requires the following notice:  We are a Debt Relief Agency, which means we help people get legal relief from their Debts through the bankruptcy process. Interested in learning more about our bankruptcy attorney near Mobile, Alabama? Contact Us for help with chapter 7 bankruptcy or chapter 13 bankruptcy in Mobile, Baldwin and Washington counties. Education Juris Doctor, Cleveland Marshall College of Law, 1997 Employed full time as a paralegal while attending law school in the evenings. B.A., The College of Wooster, 1994 NCAA Div.III All Conference (N.C.A.C.) Football Team : Defense 1993; Most Inspirational Senior Award 1993; Co-captain 1993; Letterman 1991-1993; Phi Sigma Alapha Fraternity 1991-1994; Athletic Director Jurisdictions Admitted to Practice Alabama

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I'll BE there for you.

I'll never be the kind of attorney your creditors want me to be. I'll always be the kind of attorney you NEED me to be. Call me. I'll BE there for you. - Kevin Ryan, Attorney at Law

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