Cramdowns and Scrape-offs

Cramdowns and scrape-offs are special tools designed to help people
who have filed a Chapter 13 bankruptcy.  They are not available to
people in a Chapter 7.  First off is the cramdown.  If you have a car
that you have owned for more than two and a half years, your may be
able to force the lender to refinance at the car’s current value.  For
example, if you have a car that you’ve owned for 4 years that’s worth
$5,000, but you owe $9,000, you can declare the excess $4,000 as
unsecured debt.  Therefore, you would owe $5,000 on the car, and the
$4,000 would go in the same debt category as credit cards, wholly

The scrape-off is similar, but applied to houses.  In this
situation, if you have a house that is worth less than the first
mortgage, you can initiate adversary proceedings against the second
mortgage lender.  You would claim that because the first mortgage
covers the value of the house, the second mortgage is wholly
unsecured.  Therefore, the second mortgage would be reduced to the same
debt category as credit cards, and would only need to be paid as little
as pennies on the dollar.

These two tools together can make a Chapter 13 bankruptcy much more
appealing option for people in particular situations.  They could
easily save you a hundred thousand dollars in the long run.  If you
would like more information about these tools or bankruptcy in general,
give us a call at (602) 977-2859, or visit us at

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