The Bankruptcy code has another its own little “Hanging Chad” issue. This is the “anti-cram down” provision in Chapter 13 Bankruptcy.
We discussed what a “cram down” is in a prior blog entry. There is another piece to know. Houses generally cannot be crammed down. There are exceptions. Lets talk about the rules of cramming down a house.
In order to cram down a house, it must NOT be your primary residence, and you must be able to pay the value or balance (which ever is lower) over a period not to exceed 5 years.
First- the house cannot be your primary residence. A primary residence is where you live the majority of the time.
Second, you must be able to pay the balance or value over 5 years (60 months). Lets talk about “lower.” This means that the first thing to determine is which is lower, the balance or the value. Most people these days (since the real estate crash) have negative equity in their home. They owe more than the house is worth. In this case, the person would pay the value of the house. In some cases, the house has been owned for a long time. In those cases, the balance may be very low. In this case, the person would pay the balance.
The next concern is that the money must be paid over 60 months, 5 years. This means that you have to be able to afford the amount, including interest.
Lets talk about an example. My client owns a house in Southern Florida. The market in Florida crashed worse than most places in the US. The house was appraised at $35,000. The problem, of course, is that the balance was around $130,000. BUT, the client lives in Virginia. The client was able to re-value the loan and balance to about $35,000, and pay $35,000 over the life of the Bankruptcy, keeping the house, and reducing the amount to be paid. When the Bankruptcy ends, the house will belong to the client, having paid about a quarter of the loan balance.
Please remember that this is an exceptional circumstance, and that not all cases turn out this well.
KCLS LIMITS THE GEOGRAPHY IN WHICH WE TAKE CASES.
YOU MUST BE A VIRGINIA RESIDENT.
OUR FEES: Our fees are controlled by the local rules and your situation. They may vary from “free” or probono representation to a flat fee to an hourly fee, depending on your situation.
KCLS is a debt relief agency. We help people file for Bankruptcy protection.
If you are not a Virginia Resident, click here to find a lawyer near you.
Contact us by e-mail or by telephone or fax or US Mail.
You can call us: 804.303.0204
You can fax us: 804.303.0209
You can contact us by US MAIL:
Krumbein Consumer Legal Services, Inc.
5310 Markel Rd. Suite 102
Richmond, VA 23230