As of this writing, foreclosures are surging here in New Jersey. Bankruptcy can be an important tool in protecting yourself from foreclosure. And unfortunately, single-family homeowners aren’t the only ones who are vulnerable. So are small-scale landlords, or those who had the chance to buy vacation properties during better times.
A mortgage cram down might be an option during your Chapter 13 bankruptcy. It can be a significant tool for reducing your overall debt while allowing you to keep certain properties.
Here’s what you need to know about this important legal tool.
Cram-Downs Apply to Upside Down Loans
The cram-down process takes an upside-down loan and reduces that loan amount to the actual value of your property.
Let’s say you have a $500,000 loan on a property that is really only worth $300,000. There are several reasons why this may be the case: you got a predatory loan, interest rates were high when you took out the mortgage, or property values fell in your neighborhood.
Either way, the actual value of the property is far beneath the value of the loan, and a cram-down may be appropriate.
Cram Downs Apply to Mortgages that are Due to Be Paid Off
Cram-downs are really only available to borrowers who are due to pay off their loan in three to five years. This means you’d be eligible to pay off this loan anyway during the course of a normal Chapter 13 bankruptcy.
Cramming it down reduces your debt just a little bit and may reduce your monthly Chapter 13 payment by a significant margin, making it more feasible.
Cram-Downs Aren’t Available on Your Primary Residence
For your primary residence, your mortgage amount will remain exactly the same. You’ll be able to catch up with any payments that are in arrears during the course of your Chapter 13 payments, but the mortgage terms will remain unaltered.
Instead, cram-downs are available to those who have rental properties and vacation properties. There is a chance to keep those properties, and to reduce your mortgages at the same time.
Get Help Today
In addition to getting an appraisal done, you’ll need to take several other steps to take advantage of a mortgage cram down. They are not guaranteed to any borrower; your lawyer will have to petition for a cram-down and your judge will have to award one.
If you’re struggling financially you shouldn’t have to give up everything you’ve worked so hard for. We may be able to help you put together a financial fresh start without resetting you to “Square One.” Contact us to schedule a free financial review today.