Whenever you take a loan in Texas, there is a chance the balance might greatly exceed what you would normally need. This often occurs when you purchase a vehicle. It is easy to wind up with a debt totalling to $20,000 when the car you want to buy only costs $15,000. When this happens, you can file for Chapter 13 bankruptcy and get a cramdown.
How can debt reorganization help you?
Chapter 13 is a form of debt reorganization that lets people settle their balance over the course of approximately three to five years. It is what allows people to get cramdowns to help them reduce their debts.
Cramdowns are named as such because they “cram down” the debt and reduce it to the fair market value, so long as you file for Chapter 13 bankruptcy. This process helps debtors in numerous ways:
- Lowers secure debt: Cramdowns reduce the principal debt to the fair market value of the collateral.
- Reduces monthly payments: By reducing the debt, cramdowns cut down high interest rates, meaning you spend less per month.
- Retain valuable assets: Cramdowns and Chapter 13 bankruptcy restructure your debt loans and protect your belongings from repossession.
Many people in Texas use cramdowns to help them recover financially after filing under Chapter 13. Cutting the debt down to the market value of property eliminates the deficiency balance and makes it easier for you to retain the assets you need to recover financially.
Seeking legal guidance
Understanding Chapter 13 bankruptcy can be difficult without guidance from a legal professional. Many people turn to their attorneys for advice, helping them make sense of the laws and limitations concerning their debts, as well as what rights they have.
