Chapter 13 Bankruptcy Lawyer Altus, OK
An Altus, OK Chapter 13 bankruptcy lawyer often uses cramdowns and lien stripping when dealing with a client’s Chapter 13 bankruptcy. These are two valuable tools that can help restructure the client’s debt and help them obtain financial stability by modifying the terms of certain secured debts and eliminating or reducing the liens associated with them. The following is a brief overview. For more detailed information, contact Marty Martin Bankruptcy Law.
What Is a Cramdown?
Cramdowns refer to the process of reducing the principal balance, interest rate, or extending the repayment term of a secured debt. Debtors can take advantage of cramdowns when the value of the collateral securing the debt is less than the outstanding balance. For example, if a debtor owes $20,000 on a car loan, but the car’s current value is only $10,000, the debtor can propose to reduce the loan balance to the car’s value of $10,000. This allows debtors to repay their debts based on the collateral’s actual worth, helping them to better manage their financial obligations.
What Is Lien Stripping?
As an Altus Chapter 13 bankruptcy lawyer can explain, lien stripping applies to situations where a debtor has multiple liens on a single property or asset. In Chapter 13 bankruptcy, debtors may be able to eliminate junior liens (liens that are subordinate to senior liens) if the value of the property securing the liens is insufficient to cover both the senior and junior liens. For example, if a debtor has a first mortgage of $200,000 on a home with a current value of $180,000, and a second mortgage of $50,000, the debtor can seek to strip the second mortgage lien entirely. This allows debtors to focus on repaying the primary mortgage and may provide them with significant financial relief.
Repayment Plans
Both cramdowns and lien stripping require debtors to make payments under their proposed repayment plans for the duration of the Chapter 13 bankruptcy. If debtors successfully complete their plans and fulfill all requirements, the remaining unpaid balances on modified secured debts can be discharged at the end of the bankruptcy process.
Limitations
It is important to note that cramdowns and lien stripping are subject to certain limitations and conditions. For instance, the debtor must be able to demonstrate the ability to make regular payments under the proposed plan, and not all types of debts or properties are eligible for these provisions. Additionally, the bankruptcy code imposes specific requirements and guidelines regarding the valuation of collateral, the timing of lien-stripping motions, and other procedural aspects.
Contact a Bankruptcy Law Firm
Cramdowns and lien stripping are powerful tools available in Chapter 13 bankruptcy, allowing them to restructure their secured debts and reduce the burden of liens on their assets. These provisions can significantly improve a debtor’s financial situation and provide them with an opportunity for a fresh start. Consulting with a qualified Altus Chapter 13 bankruptcy lawyer from Marty Martin Bankruptcy Law is essential to understand the intricacies of cramdowns, lien stripping, and other aspects of bankruptcy to make informed decisions regarding debt restructuring and repayment.