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What is a "motion to cram-down"? Also, what is the purpose of multi pre-trials? Our builder is in bankruptcy and we have go...

What is a "motion to cram-down"? Also, what is the purpose of multi pre-trials? Our builder is in bankruptcy and we have go...

Q: What is the cram down principle?

The cram down principle refers to the legal ability of a bankruptcy court to reduce the amount owed on a secured debt to the value of the collateral. This principle is applied in Chapter 13 bankruptcy cases, allowing debtors to keep their assets while repaying only what the assets are worth, rather than the full amount owed.

Q: What does 'crammed down' mean?

'Crammed down' refers to a situation in bankruptcy where a court reduces the amount of a secured debt to the value of the collateral. This term is often used in the context of Chapter 13 bankruptcy, where debtors can keep their property while paying back a lower amount that reflects the property's current market value.

Q: What is the cram down method?

The cram down method is a legal approach used in bankruptcy cases to adjust the amount owed on secured debts. It allows a debtor to pay back only the fair market value of the collateral instead of the full debt amount. This method helps debtors manage their financial obligations more effectively while retaining their assets.

Full question:

What is a "motion to cram-down"? Also, what is the purpose of multi pre-trials? Our builder is in bankruptcy and we have gotten copies of notices that state "motion to cram-down" and we are not familiar with this term. Also, our builder is facing a trial, but up until now, he has had several "pre-trials" which do not seem to amount to much. Tried researching both with no luck.

Category: Bankruptcy
Date: 04/07/2025
State: Florida

Answer:

Cram-down is a term used in bankruptcy law to refer to the Chapter 13 provision that allows debtors to retain collateral as long as they offer repayment of the “secured portion” or fair market value of the collateral in their repayment plan. For example, bankruptcy law permits a debtor to reduce his/her car payments if the replacement value of the vehicle is less than what the debtor owes to fully pay off the vehicle.The balance of the indebtedness that exceeds the fair market value of the collateral is considered to be unsecured and is placed at the lowest priority of payment.

The effects of the cram-down are reducing the amount of the secured claim to the value of the property at the time the bankruptcy plan is confirmed, providingthe debtor with more time to pay the loan, and reducing the value of interest to the prime rate. For example, a two (2) year loan of $8,000.00 at an interest rate of 16 percent may be reduced to a claim of $6,000.00 payable over a period of six (6) years at the prime interest rate. If the debtor decides he doesn’t want the car anymore, he can simply stop paying the trustee and abandon the plan. There is no penalty for a debtor who doesn’t live up to the terms of the bankruptcy plan.

This content is for informational purposes only and is not legal advice. Legal statutes mentioned reflect the law at the time the content was written and may no longer be current. Always verify the latest version of the law before relying on it.

FAQs

What is a cramdown plan?

A cramdown plan is a type of bankruptcy repayment plan that allows a debtor to reduce the amount owed on secured debts to the fair market value of the collateral. This is common in Chapter 13 bankruptcy cases. For example, if a debtor owes more on a car than its current value, the cramdown allows them to pay only the car's value in their repayment plan, treating the excess amount as unsecured debt.

How does cramdown work?

Cramdown works by allowing a debtor in bankruptcy to lower the amount owed on secured debts to the current market value of the collateral. This means that if the collateral's value is less than the debt, the debtor can pay back only that lower amount over time, while any remaining balance is treated as unsecured debt. This helps debtors manage their payments more effectively.

What is the cram down principle?

What does 'crammed down' mean?

What is the cram down method?

What is a motion to cram down?

A motion to cram down is a formal request made in bankruptcy court, asking the court to reduce the amount owed on a secured debt to the value of the collateral. This motion is typically filed in Chapter 13 bankruptcy cases, allowing debtors to keep their property while repaying a lesser amount that reflects the asset's current market value.