If you're considering filing for bankruptcy Chapter 13, you may have heard that the bifurcation process may help help you make more affordable payments on your debts and hang on to some of your possessions. But how does it work?
Chapter 13 bifurcation, also known as a "cramdown," is a debt manipulation tool that sometimes allows bankruptcy filers to hang on to assets secured by loans and pay a smaller percentage of the associated debts. Here's how it works:
Unfortunately, primary mortgages cannot be bifurcated or crammed down in Chapter 13 bankruptcy. This is one provision of bankruptcy law that is very clear and very frustrating to many filers. What this means is that the bankruptcy court cannot modify the terms of a primary mortgage, even to accommodate the recently decreased value of a house.
Second or third mortgages, mortgages on properties not used as a primary residence, car loans and other secured loans can generally be bifurcated or crammed down in bankruptcy court.
If you're ready to learn more about this particular aspect of Chapter 13 bankruptcy law, or see if Chapter 13 might be the right solution for you, you can speak with a bankruptcy lawyer in your area for more information. Simply fill out our free online evaluation form to arrange a free, no-obligation initial consultation with an attorney near you.