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Chapter 13 Bankruptcy – What cannot be “crammed” down

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Amounts paid on certain debts secured by assets can be reduced in a chapter 13 bankruptcy. The most common are:

1. Car loans entered into more than 910 days prior to the filing of a chapter 13 bankruptcy.

2. Second mortgages on homes where the home value is less then the debt owed on the first mortgage.

A reduction or “cram down” as it is commonly known is not available to reduce the following loans in a chapter 13:

1. First Mortgages

2. If the creditor has a “purchase money security interest” in the property (money lent to buy the property in question:

a. loans for motor vehicles that were purchased for personal use within about 2.5 years of the filing date.

b. loans for any other property purchased within 1 year of the filing date.

For these items, the full amount of the debt has to be paid to the creditor through the plan in order to keep the property.