Amounts paid on certain debts secured by assets can be reduced in a chapter 13 bankruptcy. The most common are:
1. Car loans entered into more than 910 days prior to the filing of a chapter 13 bankruptcy.
2. Second mortgages on homes where the home value is less than the debt owed on the first mortgage.
A reduction or “cram down” as it is commonly known is not available to reduce the following loans in chapter 13:
1. First Mortgages
2. If the creditor has a “purchase money security interest” in the property (money lent to buy the property in question:
a. loans for motor vehicles that were purchased for personal use within about 2.5 years of the filing date.
b. loans for any other property purchased within 1 year of the filing date.
For these items, the full amount of the debt has to be paid to the creditor through the plan in order to keep the property.
