Jump To Navigation

Chapter 13 Cramdown: A Useful Tool in Bankruptcy

The term “cramdown” allows a debtor who owns a vehicle that is worth less than what is owed on it to reduce the balance and interest rate on the car loan.  It is far too common for individuals to end up with a car loan balance that is greater than what the car is worth.  In a chapter 13, you can propose that the lender of the vehicle receive only that value of the car instead of the entire amount owed due under the loan.  For example, you owe $20,000 on your car and it is only worth $10,000 now, you can claim that the lender only has $10,000 that is secured. So, if the lender were to repossess you vehicle, the lender would only receive $10,000.  Therefore, the remaining balance of the loan should be $10,000, treated as unsecured claim.

There are restrictions on a vehicle cramdown.  First, a vehicle cramdown is only available in a Chapter 13 bankruptcy.  Second, the vehicle must be for personal use.  Third, the vehicle must have been purchased at least 2 ½ years (910 days) before filing for bankruptcy.  Lastly, the loan must be more than the fair market value of the vehicle.

The debtor may also ask to reduce a high interest rate, or change the number of months for repayment.  However, the interest rate and payment time may still be adjusted to a court-ordered interest rate, called the “Till rate” so named after the U.S. Supreme Court case, Till v. SCS Credit Corp., 541 U.S. 465 (2004).  The Till rate is often less than the debtor’s original interest rate, and lowers the monthly payment.  Vehicle debt for many Chapter 13 debtors is paid at the Till rate over the course of the bankruptcy case.

If you want to know if you qualify for a cramdown in a Chapter 13 bankruptcy, contact the Wright Law offices with offices located in Avondale, Phoenix, and Scottsdale.


Read more about our bankruptcy services…

Contact Us for a Free Consultation
Office Locations

Phoenix Office
Wright Law Offices
668 N. 44th St., Ste 320
Phoenix AZ 85008

Telephone: 602-456-6085 / 866-703-3287
Phoenix Law Office

Scottsdale Office
Wright Law Offices
7135 East Camelback Road, Ste 230
Scottsdale AZ 85251

Telephone: 480-845-0145 / 866-703-3287
Scottsdale Law Office

Tempe Office
Wright Law Offices
2238 S. McClintock Dr.
Tempe AZ 85258

Telephone: 480-845-0145 / 866-703-3287
Tempe Law Office

Avondale Office
Wright Law Offices
12725 W Indian School Rd, Suite E-101
Avondale AZ 85392

Telephone: 623-258-4480 / 866-703-3287
Avondale Law Office

Prescott Office
Wright Law Offices
1129 Iron Springs Rd
Prescott AZ 86305

Telephone: 623-258-4480 / 866-703-3287
Prescott Law Office

Mesa Office
Wright Law Offices

1731 W. Baseline Rd.
Suite #100
Mesa, AZ 85202
Telephone: 480-845-0145 / 866-703-3287
Mesa Law Office

Glendale Office
Wright Law Offices
20325 N. 51st Ave., Suite 134
Glendale, AZ 85308
Telephone: 623-258-4480 / 866-703-3287
Glendale Law OFfice

Facebook IconTwitter IconVisit Us On Google+Visit Us On Google+