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In the current economy, many people own property that has declined in value faster than they have been able to pay their mortgage. This means that their mortgage balance is greater than the true market value of their house, commonly known as an “upside down” mortgage.
For example, say you bought an investment property for $300,000. Later, the value drops to $150,000, but you still owe $250,000 on the mortgage. In this case, you can cram your mortgage down to $150,000, the current value of the property. The remaining $100,000 becomes unsecure debt.
This process is a Cram Down and is a powerful tool for those who are eligible for a Chapter 13 bankruptcy. A Cram Down forces creditors to lower the money a person owes on most secured debts. You can cram down mortgages on your investment properties such as rentals or commercial properties. However, you cannot cram down the mortgage on your primary residence, but you may be able to get rid of your second of third mortgage on your main residence through the process of lien stripping.
To explore your options and see if a Cram Down is the best option for you, contact us today!