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Reduction of the amount of the lien to the market value is known as ‘cramming down’. Here, if the mortgage balance is larger than the property value then the mortgage balance will be reduced to the property value. It is done in chapter 11 on properties that do not come under the exempt property that is it should not be a primary residence. Mortgage, Home Equity Line of Credit, Homeowners’ Association, and judgment comes under liens that can be crammed down.
You can remove fully unsecured liens in rental properties in chapter 11 and you can remove fully unsecured liens from residential properties in chapter 13.
Bankruptcy real property evaluation-
Real property valuation is done in chapter 13 and chapter 11 bankruptcy to see whether the liens are secured, secured, or unsecured and whether or not they can be crammed down. It will also determine whether the debtor falls under the eligibility limit that is if the debts are fully unsecured then it will go under the unsecured debt limitations and if the debt is fully secured or partially secured it will go under secured debt limitations.
Property value is not constant and due to the lack of clarity in the bankruptcy code about when the court will value the property, it is dependent on each judge when they will value the property.
For instance:
– In re Abdelgadir, 455 B.R. 896 (9th Cir. BAP 2011). The United States Bankruptcy Appellate Panel of the Ninth Circuit determined that the valuation date for a secured claim was the petition date.
– In re Crain, 243 B.R. 75 (Bankr. C.D. Cal. 1999). Judge Vincent P. Zurzolo of the Central District of California stated: ‘I conclude that the appropriate date of valuation for the Subject Property is the ‘effective date of the plan’ or ten days after entry of the order confirming the plan, provided no timely appeal has been made.’
– Judge Neil W. Bason of the Central District of California has previously had a ‘policy of using current value’ or in other words, valuing the property as of the current date (the date of the order being requested).
If you want to file for bankruptcy do not hesitate. It is all right to file for bankruptcy and start a new financial life. If you live in or near Los Angeles & Dallas, TX, contact Recovery law group-(888-297-6203).