Chapter 13 Cram Down and Your Residence

While a first mortgage on a primary home cannot be "crammed down," if you have a second and third mortgage a Chapter 13 bankruptcy may allow you, the homeowner, to wipe out or strip the second and third mortgages. If you are like your fellow New Jersey neighbors you may owe more on your home than your home is now worth, often referred to as being "under water" or "upside down". When the home is worth less than what is owed on the first mortgage, and you have a second and third mortgage then you may be eligible for this cram down or strip off option. The Chapter 13 "Reorganization" bankruptcy allows the homeowner to catch up on the arrears on their first mortgage over a three to five year plan thus avoiding a foreclosure. The amount owed on the second or third mortgage that is above the value of the home is classified as "unsecured debt" and is then grouped with your other unsecured debt, such as credit cards and medical bills, which is treated differently than your first mortgage under the bankruptcy laws. How much you will have to pay back on this unsecured debt will be determined during the bankruptcy procedure and then you will be required to pay back only the amount determined within the three to five years of the repayment period. Debtors must show they have the means to make the payments to be eligible for approval of a Chapter 13 bankruptcy. At a minimum, this will require employment providing a steady cash flow which may be applied to payment of outstanding debts while leaving enough for basic living expenses. If you owe more than you can pay and have a second or third mortgage, you should consult with an experienced New Jersey bankruptcy attorney immediately to protect your rights. For more information regarding bankruptcy, foreclosure, student loans or other consumer debt related matters in New Jersey visit TheNJBankruptcyAttorney.com This blog is for informational purposes only and is in no way intended to replace the advice of an attorney regarding your specific matter. Our law firm is a debt relief agency and helps people file for bankruptcy relief.