Cramdowns – They Work!
Sunday, March 15, 2009 | Comments Off
I know someone that was successful in having their second mortgage on their primary residence “stripped” after they successfully completed their Chapter 13 Bankruptcy payment plan. GREAT!! The following is my blog of March 15, 2009, written in hopes many would pursue “creative debt solutions.”
Appetizing, isn’t it! ”Proponents call it the crucial missing tool needed to get us out of the national foreclosure morass.” What is it? Who is affected? How is it done?
“Cramdown” became the term used to refer to an action by a judge in a Chapter 13 Bankruptcy. It would give the authority to the Judge to reduce what a person owes on credit cards, auto, boat and student loans – even a second home mortgage. Under current law, they cannot cut the mortgage debt on the principal residence. That allows lenders to foreclose on delinquent homeowners to recover what they are owed. Some political leaders in the house and Senate have been pushing for a change in the bankruptcy law to include principal residence loans, i.e., “judicially modified”. These were considered “crammed down” by the courts.
It has been argued that banks and mortgage companies too often have been unwilling to offer delinquent borrowers serious modifications because they have to foreclosure option.
The final outcome should be interesting, probably unrecognizable!