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Cramdown lowers vehicle loan payments and the total paid on the loan. But you can also get similar benefits on other personal property debts.


Our last 4 blog posts have been about Chapter 13 cramdown of vehicle loans. For most people filing a consumer bankruptcy case, their vehicle loan is their largest and most important personal property debt.

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When is it better to reaffirm your secured debt—such as a vehicle loan—in a Chapter 7 case or instead cram it down under Chapter 13?

The last 4 weeks of blog posts have been about options for keeping collateral through Chapter 7 and Chapter 13. Mostly these options have involved reaffirming a secured debt in Chapter 7 or cramming it down in Chapter 13. Here is a handy summary and guide.

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The 910-day & 1-year conditions for doing a Chapter 13 cramdown don’t apply if the creditor doesn’t have a purchase money security interest.

The Cramdown Advantage

Last week we got into Chapter 13 cramdown of vehicle loans and furniture loans. Cramdown can be an excellent way to keep personal property that’s securing a loan. It allows you usually to reduce the monthly payment as well as the total you pay on the debt. Often the reductions are significant. Cramdown can enable you to keep a vehicle or some other important personal property that you couldn’t otherwise. It can be a reason to file a Chapter 13 case because it isn’t available under Chapter 7 “straight bankruptcy.”

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A creditor’s rights over you in either Chapter 7 or 13 vastly increase if it has a security interest. Now’s the time to find out for sure.

Reaffirmation vs. Cramdown

The last four blog posts have compared Chapter 7 reaffirmation with Chapter 13 cramdown of a secured debt.

With reaffirmation you keep the vehicle or other collateral but continue to owe the debt. Usually you owe the full debt, and the monthly payments remain the same. But sometimes the debt and monthly payments can be reduced if the collateral is worth less than the balance.

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An example comparing the reaffirmation of a debt secured by furniture in a Chapter 7 case and cramming down that debt in a Chapter 13 case.

Last time we showed how cramdown on a vehicle loan can reduce the payments and the total amount you pay. The amount you save monthly and in total may be enough to justify filing a Chapter 13 case. The alternative is usually paying the full monthly payments and the full contract balance through Chapter 7 reaffirmation.

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