Cramdown and Payoff

[JimineCricke]

I have a vacant land investment property worth 20k and no other assets. My income is below the means test amount. The investment property has a first mortgage of 100k.

I want to file Chapter 13, Cramdown the mortgage to 20k. Papa is willing to refinance me at the 20k amount so I can payoff the original mortgage.


Anything wrong with this plan?

[forgotten]

I have a vacant land investment property worth 20k and no other assets. My income is below the means test amount. The investment property has a first mortgage of 100k.

I want to file Chapter 13, Cramdown the mortgage to 20k. Papa is willing to refinance me at the 20k amount so I can payoff the original mortgage.


Anything wrong with this plan?

You can not cramdown a mortgage. You can strip a second mortgage if the value is less than the first, but you can in no way modify your primary mortgage.

Edit: Your best option is to file a Chapter 7 and surrender the property.

[JimineCricke]

You can not cramdown a mortgage. You can strip a second mortgage if the value is less than the first, but you can in no way modify your primary mortgage.

Edit: Your best option is to file a Chapter 7 and surrender the property.

I thought you could cram down if not your primary residence?

[sofarsogood2]

Forgotten-It's vacant land, not primary.

OP-
Is this loan the main reason you are considering BK?

If so:
You might try to negotiate this with the lender before BK- some (not all) may be willing to settle.
Having a loan to Dad, in a BK, to cramdown a loan, might not be looked upon favorably by the trustee. I think the Trustee/lender might object esp. if you have disposable income in excess of 20K over a 5 yr. period. I think you need to speak to an attny. familiar with the trustee and customs in your area.

7 & surrender may be a better option. I don't think there is a law against Dad purchasing the property at auction. I know someone whose parents did just that.

[debtinohio]

Does vacant land really = an investment property for purposes of a cramdown? I have no idea, just seems odd.

I'm having trouble cramming down the value of an RV trailer from 12900 to 9900, due too this being considered a "luxury item", I can't see getting vacant land getting crammed down $80,000 without a long fight. Just like the lenders argument on my trailer, is it a necessary item for an effective re-org?

And this would need to be paid off within the 5 years.

[NoTomatoCan]

Just a thought - I was under the impression that to keep an investment property, it had to be cash flow positive (basically pay for itself). Of course, if it is only valued at $20k, that might not be an issue.

[HHM]

You still can't cram real property in a chapter 7. (investment or otherwise)

But you can in a 13. You would still need to make some sort of token payment and the unsecured creditors would need to get some dividend.

[forgotten]

You still can't cram real property in a chapter 7. (investment or otherwise)

But you can in a 13. You would still need to make some sort of token payment and the unsecured creditors would need to get some dividend.

HHM, I got to thinking about this... If you crammed it down to $20k, you would need to pay it off durring your chapter 13 which would be about $350/mo (assuming the till interest rate). However, this land wouldn't be required for the reorg of the debtor. So they would need to commit all their disposible income + an extra $350/mo or repay all the rest of the unsecured debt at 100% also.

Would that be correct?

[HHM]

That is the argument you would get from the Trustee. The overall circumstances will dictate if the trustee will win on that argument.