Fremont Bankruptcy: Ch. 13 Cram-Down

A big benefit in filing a Chapter 13 bankruptcy is that it will lower the amount of debt you owe on most of your secured debts.  This is also called a “cram down.”  With secured debts are debts that you will have to return that item if you do not pay.  Examples of such items are a car or furniture or house (although cram down is not an option for you house).  Financing for a car or furniture will typically require you to make a number of monthly payments to repay the loan.  Often, the loan that you are repaying will worth more than the value of your item, since the item’s value is decreasing at a faster rate than the repayment rate.  For example, if a car was purchased two years ago, it is presently worth $6,000 but the amount of loan still owed is $10,000.  You can typically use Chapter 13 to cram down these debts by paying only the value of the property in full and interest on the remaining paid as little as a penny for every dollar owed.  This can be a  big relief for many of our clients in Fremont.

Another benefit that Chapter 13 offers is that you can reduce the interest you are required to pay on a secured loan (however, this does not apply for a mortgage).  Many car or furniture loans have interest rates as high as 15% to 30% and sometimes, even more.  You will only have to pay most secured debts at the prime rate plus 1% to 3% interest, depending on the circumstances, in a chapter 13 bankruptcy.  By filing a chapter 13 bankruptcy, many debtors will be able to save up to millions of dollars each year.

Due to the two benefits, cramming down and reducing the interest rate, Chapter 13 can save you a lot of money.  If you are falling behind on payments to a secured loan or you no longer can afford the monthly payments due to the high interest rate, consider filing a Chapter 13 bankruptcy.  For more information about getting started with your bankruptcy, call a knowledgeable Fremont attorney at Sagaria Law.

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