Would This Cause a Creditor to Object to a Chapter 13 Plan?

I worked on a case this past week with a California attorney, practicing in the Riverside Division of the Central District.  The client had a home that carried a mortgage of $402,500; however, the home was appraised at only $178,000.  This is a common occurrence in California.  Although the real estate market crash has affected every state in a large way, the state of California seems to have the largest gap.  And every time I prepare petitions in California, it amazes me at the staggering numbers I encounter.

Perhaps it is because I am originally from the Midwest.  I too lost a home to foreclosure.  My house was appraised in 2005 at $210,000; but by 2008, it was worth about $82,000.  So, I am accustomed to witnessing a 40-50 percent gap between the mortgage balance and the appraisal; but California has the highest that I have ever seen.  For example, when I was in Ventura, California; I worked on a case where $920,000 (almost $1 million dollars) was owed to three separate mortgage companies.  The home was appraised at only $250,000.  So in this case, by proposing a cram down, this attorney was able to save his debtor $670,000.  It is shocking to say the least!

Why was a cram down proposed?

For the case I worked on this past week, when the debtors income and expense information was entered into Schedule I and J of the bankruptcy petition, the Chapter 13 Plan calculator in the software told us the debtor did not have enough disposable income to pay the current mortgage payment of $2,500.  However, by reducing the mortgage payment to only $1,500; the debtor would be able to afford to stay in his home.  (The mortgage payment was reduced because the home was crammed down from $402,000 to $178,000.)

If this option would have been permitted in Ohio (where I lived back in 2008 after my hospitalization) I could have filed a Chapter 13 and possibly reduced the amount owed to my mortgage company from $210,000 to $82,000; thereby reducing my monthly payment.  Instead, I lost my home.  But in the state of California, cram downs are permitted and encouraged by the Chapter 13 Trustees office; especially in the Central District of California.  The California attorneys should be overjoyed about this because they have an advantage over most of all the other states, including Ohio.

In order to propose a cram down in the state of California, a separate Motion and Order must be prepared and submitted by the debtor(s) bankruptcy attorney.  More information on these Cram Down documents are available at:


What is the success rate with the proposal of cram downs?

I am a certified paralegal so I am unable to comment on the law.  However, I can tell you that the cases I have worked on in the state of California have all been successful when proposing a cram down.  This is not to say there have not been objections and amendments to the Chapter 13 Plan along the way; but in all cases I worked on, the attorneys were able to save their clients hundreds, if not thousands of dollars.

I suppose if an attorney lacked a strategy in order to argue in the best interest of his or her debtor, that attorney could be unsuccessful in getting a cram down approved, so let us review one typical example that could happen.

In the case I worked on this past week, the debtor had three motor vehicles, all of which had high monthly payments.  In fact the total motor vehicle payments were $1,100 per month.  Cases that I have worked on in the past have shown me that creditors often object to the fact that a single debtor does not need three motor vehicles.  So, for example, instead of allowing the debtor to keep his Harley Davidson and continue making payments of $675 per month, the mortgage company would prefer this money is paid to them since the debtor already owns a truck he is paying $450 per month for.  When the attorney is already asking the mortgage company to excuse $270,000 in a proposed cram down, it is often unfair to ask them to reduce the mortgage payment to allow $675 to be paid for a third vehicle that is not necessary for the debtors reorganization.

Situations like this happen in almost every bankruptcy case and bankruptcy court across America.  The outcome is not always the same in every state because creditors may or may not file a Proof of Claim or hire a law firm to represent them (among other numerous reasons.)  Besides, many mortgage companies are so overloaded with foreclosures and sale dates that cram downs are approved more often than not.  This is where the bankruptcy attorney needs to take the plunge and at least attempt to save their debtors some money.  The worst that can happen is that the Chapter 13 Plan is amended to comply with the Trustees final decision and request.


Although I am well known as a training instructor for bankruptcy law firms, I still enjoy preparing new bankruptcy petitions and interviewing clients.  Working inside law firms for the first 26 years of my career taught me a lot and provided me with a great deal of experience. I have to give credit to the excellent bankruptcy attorneys that trained me, as well as the attorneys I work with currently.

At the moment, I am looking to add three attorneys to my workload and I can assure you extremely professional, dependable and high quality paralegal services from someone who has been around the block several times.  My prices are only $350 to prepare a basic Chapter 7 and $450 for a Chapter 13.  If the case is more complicated or is a business bankruptcy filing, the price will be slightly higher.  My turnaround time is 72 hours unless rush service is requested. No payment is required until the bankruptcy petition is prepared to your satisfaction.  Electronic filing services are also included.

I hope you will consider my services the next time you need a Chapter 7 or 13 bankruptcy petition prepared.  In the meantime, be sure to download your free Client Intake Forms at:

Have a wonderful week.  (Victoria Ring, Office: 719-375-1504)


One Response to “Would This Cause a Creditor to Object to a Chapter 13 Plan?”

  • Melynda Mall:

    When cramming down the property through a Chapter 13, does it have to be rental property or can it be the primary residence? Also, does the entire cram down amount need to be paid within the 60 month term of the Plan? Just curious. In Nevada you can cram down anything, except the primary residence, and it must be paid in full during the term. I thought this was very interesting and wanted to learn more information.