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How cramdowns in Chapter 13 bankruptcy can save your car and other assets


In Chapter 13 bankruptcy, you will propose a plan to the court to make a monthly payment toward your debt over the course of three to five years.


In Chapter 13 bankruptcy in Minnesota, you will propose a plan to the court to make a monthly payment toward your debt over the course of three to five years. You and your Carver bankruptcy lawyer will come up with this amount together, based on how much you owe your creditors, your income and your budget. At the end of your payment plan, the remainder of your debts are discharged, and you are no longer responsible for those debts.

Additionally, in Chapter 13 you can petition the court for a “cramdown” on certain types of property. This procedure is usually applied to cars, which historically depreciate in value over time, but can also be used to reduce the amount you owe on other big-ticket items like furniture. In a cramdown, you argue for repaying only the value of the item in question, rather than the remainder of the loan you took out on it.

You can cramdown both the balance of the loan and the interest rate on it in Chapter 13, which ultimately can reduce debt on a vehicle significantly.

Certain conditions need to be met for your attorney to successfully argue a cramdown, but the basic concept is this:

  • You have a loan for $20,000 on a vehicle. Now, however, that car is only worth $10,000. You still owe $15,000. With a cramdown, you would only be liable for repaying $10,000 on this debt.
  • You signed an agreement on your car loan for 10 percent interest, high above the basic prime rate. You can cramdown the interest on your loan, lowering your monthly payment and the overall total you owe.

If you’re struggling to make car payments or monthly bills, contact an attorney to find out the cost of Chapter 13 bankruptcy and how it can help you.

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