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The following article was authored by Justin Coke , a Columbia, MO attorney.  More information about Justin and his firm can be found on his website:  He can also be reached by phone at (573) 886-8919.

Cramdown Defined

The term cramdown comes from the fact that creditors hate them and so they have to be crammed down their throat.   A cramdown occurs when the debtor files bankruptcy and wants to pay a secured creditor what their security is worth rather than the balance of the loan.

A cramdown happens in bankruptcy when the balance of a loan is greater than the value of the property.  Say you owned a mobile home.  The mobile home is worth $15,000 and you still owe $33,000.  Instead of paying the $33,000, you can cramdown the mobile home and only pay $15,000.  The interest rate is also generous.  At the time of writing the default rate in the Western District of Missouri is 4.52%.  Paying less interest on a smaller balance is a very powerful weapon.   A cramdown can easily save you tens of thousands of dollars.

There are a few exceptions to the cramdown rules.  You can’t cram down a car loan for 910 days (2 1/2 years) after you bought it.  It can be impossible or very difficult to cramdown your personal mortgage.  But if you have a mobile home, or a car or other property that is worth less than what you owe on it, the cramdown can be a powerful weapon in the battle to get you a fresh start.

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