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Mortgage Cram Downs California in Chapter 13 Bankruptcy

April 25, 2012 by Leave a Comment

You may be able to reduce your mortgage principal on investment or rental property.  It does not apply to a home you use as your principal residence.

A mortgage cram down allows you to reduce the principal balance of the mortgage to the value of the property.  You can use a Chapter 13 bankruptcy for this purpose.

A Chapter 13 cram down may help you.  If you owe for example, $500,000 on the investment property and its value is $250,000, through the Chapter 13 plan you pay to the mortgage lender the $250,000 rather than the $500,000.  The remaining $250,000 becomes unsecured debt and you will likely pay a small portion of that part through the plan and the rest will be discharged at the completion of the plan.

The drawback is that the courts will require the payoff of the balance of the crammed down mortgage during the Chapter 13 repayment period, typically three (3) to five (5) years, unless a refinance is achieved within two (2) years to pay off the mortgage at the crammed value.

Looking to file for Chapter 13? Contact Riverside bankruptcy attorney, Allen Sanders at the Mellor Law Firm.

Filed Under: Bankruptcy Education

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The Mellor Law Firm, APLC
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