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How Georgia Bankruptcy Filers Can “Cram Down” Secured Debts

People in financial straits sometimes opt for a Chapter 13 bankruptcy, which lets them keep their property while they pay off either all or a reduced portion of their debt over time. Although it affords some relief, a Chapter 13 plan still puts pressure on debtors to repay. However, there is a way for them to further lower the amount owed to creditors, known as a “cramdown.”

Under Section 1129(b) of the Bankruptcy Code, the debtor can propose a plan that proposes to pay a secured creditor less than the full amount owed.  This is known as a cramdown. Generally, the cramdown process involves reducing the principal balance of the loan to the market value of the property. For example, if a debtor owns a car that is worth $10,000 but has a $15,000 car loan, the plan can propose to pay $10,000 as secured with a low interest rate and pay the remaining $5,000 as unsecured without interest.

There are certain restrictions to the cramdown provision. For example, a car loan will not qualify for cramdown unless the debtor has owned the car for at least 910 days (2.5 years). This prevents someone from filing for Chapter 13 bankruptcy to cramdown a car loan immediately after purchasing the car. For other personal property, the required ownership period is one year.

If you are considering a Georgia bankruptcy, contact Jeff Field, a veteran Georgia attorney with over 30 years of experience helping debtors put their financial worries behind them and start working towards their new financial future. Call 404-381-1278 to schedule a free consultation with Jeff Field & Associates today. You can also contact us online. Our main office is located in Scottdale and we also have offices in Gainesville, Marietta, Athens, Lawrenceville and Douglasville.

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