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- A cram down benefits a debtor, because it allows the debtor to reduce the amount owed on an auto loan to the present value of the vehicle.
- A debtor that owes more on a car loan than the car is worth can cram down the loan to the replacement value. This is the retail value of a car in similar condition.
- The bankruptcy court will reduce the interest rate on the auto loan to 1½ to 2 percentage points above the prime rate.
- If a filer owes $15,000 on an auto loan, but the car is only worth $10,000, the filer can reduce the loan to the actual value. The auto will secure the loan for $10,000, but the remaining $5,000 becomes unsecured debt subject to discharge.
- A debtor is eligible for a cram down if he purchased the car more than 30 months before filing for Chapter 13 bankruptcy.
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How It Works
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