Chapter 13 cramdown doesn’t just work for vehicle loans. You can also cram down debt for the purchase of “any other thing of value.”
How Chapter 13 helps you keep personal property collateral on a debt (such as furniture bought on credit) for less money through cramdown.
You can file a Chapter 13 case if you are an “individual,” have regular income,” and don’t owe too much.
If your vehicle is worth less than you owe on it, under Chapter 7 you can keep it by “redeeming” it–paying its present value in full.
If you’re buying a vehicle, sometimes getting out of the contract is your best option. Chapter 7 lets you do that, owing nothing.
In a Chapter 7 case you “reaffirm” your vehicle loan if you want to keep your vehicle. This means you keep paying it.
A “lease” of furniture or other consumer goods may actually be a disguised purchase. If so, through “cramdown” you can pay much less on it.
Chapter 7 provides limited help if your home is encumbered by a statutory lien. Instead Chapter 13 may significantly reduce what you pay.
If a creditor’s proof of claim is a “priority” or secured debt is too high, object to it to avoid paying too much in your Chapter 13 case.
Here’s a scenario showing how Chapter 13 solves problems that Chapter 7 doesn’t solve in dealing with a creditor’s disputed lien.
When a creditor may not have a valid lien, Chapter 13 gives you a good way to defeat that disputed lien and the claim against your property.
When a creditor fails to enforce its lien in a Chapter 7 case, you are left exposed. Not so under Chapter 13.
Sometimes, even if what you bought is legally collateral on a debt, you can just write off and not pay the debt yet keep what you bought.
Chapter 13 forces the IRS/state to accept only partial payment on an income tax debt that is only partially secured by a tax lien.
If your vehicle is worth less than you owe, Chapter 13 “cramdown” can reduce your monthly vehicle payment and the total you pay on the loan.