This is the second part of a two-part series on cram down in chapter 13. In the first part I discussed how cram down can be used to reduce the amount owed on an item of personal property to the amount the property is worth today, instead of the full amount owed under the original loan agreement. In this second part I will briefly discuss limitations on the cram down option.
The “Hanging Paragraph”
In the 2005 revisions to the Bankruptcy Code, Congress inserted a provision that limits the use of cram down when dealing with Purchase Money Security Interests (“PMSI”) (where the lender provides the financing for the property and then takes back a security interest in the collateral – like most auto loans, for example). Because this new provision in the Code was added without being labeled with its own specific identifying citation in the Code, it is referred to as the Hanging Paragraph. continue reading »
The 2005 revisions to the Bankruptcy Code, known as BAPCPA, include provisions that require debtors to complete two separate credit counseling courses before being permitted to obtain a discharge.
These credit counseling provisions have been controversial. Many bankruptcy attorneys and even some judges have questioned whether the courses provide any real value.
However, a new study released last week indicates that these financial education courses may, after all, provide value to consumers. continue reading »
This is a two-part series on “cram down.” This first part provides an overview of the cram down option. The second part will discuss some built-in limitations to cram down.
Overview
“Cram down” is one of the most useful tools available under chapter 13. Cram down provides you with the right to reduce the amount you owe on secured debts on certain items of personal property. “Secured” debts are those where the creditor has the right to take back the property if you don’t make the payments.
When you cram down a secured loan, the balance owed is reduced down to the amount the property is actually worth on the day your chapter 13 plan becomes effective. You will no longer be obligated to pay the full amount that was still due under the terms of the original loan. continue reading »
If you file chapter 7 bankruptcy, section 722 of the Bankruptcy Code provides you with the right to “redeem” certain items of personal property. This means that you can keep your property by paying the creditor the amount it is actually worth on the day the petition is filed. If you do redeem property you are not required to pay the full balance due under the terms of the original loan. continue reading »
As reported today in the ABA Journal, the American Bar Association now acknowledges that job prospects are bleak for graduating law students. New students should think twice before taking on massive student loans. The ABA went so far as to recommend that would-be law students should “reconsider” their plans to attend law school. continue reading »
Today I ran across a sobering article by Graham Summers. Summers’ bio indicates that he is Senior Market Strategist at OmniSans Research. He is also the author of a large number of articles on various aspects of finance.
The article that caught my eye is titled: “It’s Impossible to ‘Get By’ In the US.” Summers states that he was prompted to write the article by the recent significant uptick in bankruptcy filings.
This article is sobering because it explains in simple terms how the expenses of life in America total more than the U.S. median income. The article shows that the “average” American simply cannot make ends meet and is falling farther and farther behind each month. continue reading »
On April 4, 2010, the BankruptcyProf Blog (a member of the Law Professor Blogs Network) published this chart showing the number of bankruptcy filings by quarter over the last several years. The chart shows that the filings continue to rise into 2010. For example, the filings for the first quarter of 2009 totaled 330,500, while the filings for the first quarter of 2010 totaled 378,400. This is an increase of over 14%.
|
Total |
Ch 7 |
Ch 11 |
Ch 12 |
Ch 13 |
|
|
|
|
|
|
| 3/31/2010 |
378,400 |
|
|
|
|
|
|
|
|
|
|
| 12/31/09 |
366,000 |
258,100 |
3,615 |
145 |
104,200 |
| 9/30/2009 |
381,500 |
270,200 |
3,525 |
158 |
107,600 |
| 6/30/2009 |
375,100 |
270,700 |
4,338 |
131 |
99,900 |
| 3/31/2009 |
330,500 |
233,500 |
3,649 |
102 |
93,200 |
| Total 2009 |
1,453,100 |
1,032,500 |
15,127 |
536 |
404,900 |
|
|
|
|
|
|
| 12/31/08 |
301,300 |
202,100 |
3,175 |
90 |
95,900 |
| 9/30/08 |
292,300 |
195,200 |
2,712 |
89 |
94,300 |
| 6/30/08 |
276,500 |
187,400 |
1,800 |
85 |
87,100 |
| 3/31/08 |
245,700 |
158,500 |
2,012 |
81 |
85,100 |
| Total 2008 |
1,115,800 |
943,200 |
9,787 |
345 |
362,400 |
|
|
|
|
|
|
| 12/31/2007 |
226,400 |
137,600 |
1,793 |
77 |
86,900 |
| 9/30/2007 |
218,900 |
132,000 |
1,583 |
71 |
85,200 |
| 6/30/2007 |
210,400 |
131,500 |
1,574 |
112 |
77,200 |
| 3/31/2007 |
193,600 |
117,700 |
1,406 |
104 |
74,400 |
| Total 2007 |
849,300 |
518,800 |
6,356 |
364 |
323,700 |
The Huffington Post is reporting that Bank of America, the nation’s largest lender, now supports the mortgage cramdown bill. This bill, which was defeated at the end of 2009, would give bankruptcy judges the ability to change the terms of a mortgage for the benefit of homeowners who have filed for bankruptcy.
Bankruptcy law allows for the altering of many types of contracts, but banks have generally opposed allowing the same for mortgages on the primary residence. In light of the current foreclosure crisis, many argue that it is now essential to give bankruptcy judges the power to alter the terms of mortgages so that bankruptcy debtors stop losing their homes.
Apparently, Bank of America now agrees. As HuffPost explains: continue reading »
Don’t be deceived by Form 1099-C. Even though a debt may be listed on this form as “canceled,” the debt is not erased, and a lender may still be able to come after you to try to collect the balance. continue reading »
This is the second part of a two-part series on cram down in chapter 13. In the first part I discussed how cram down can be used to reduce the amount owed on an item of personal property to the amount the property is worth today, instead of the full amount owed under the original loan agreement. In this second part I will briefly discuss limitations on the cram down option.
