2020 Best Invention

Cramdown in Chapter 13 Bankruptcy

4 minute read Upsolve is a nonprofit tool that helps you file bankruptcy for free. Think TurboTax for bankruptcy. Get free education, customer support, and community. Featured in Forbes 4x and funded by institutions like Harvard University so we'll never ask you for a credit card. Explore our free tool

In a Nutshell

In personal bankruptcy cases, a cramdown occurs when the filer pays off a car loan through a Chapter 13 bankruptcy repayment plan by paying only how much the car is actually worth, not how much is still owing on the loan. Upon successful completion of the repayment plan, the filer gets title to the vehicle free and clear.

Written by Amy CarstLegally reviewed by Attorney Andrea Wimmer
Updated February 10, 2021

In personal bankruptcy cases, a cramdown occurs when the filer pays off a secured debt through a Chapter 13 bankruptcy repayment plan by paying only how much the property securing the debt is actually worth, not how much is still owing on the loan. The most common secured debt subject to cramdowns in Chapter 13 bankruptcy are car loans. Upon successful completion of the repayment plan, the filer gets title to the vehicle free and clear of any security interest (called a “lien”) even though a portion of the loan has been discharged as an unsecured debt.

This is how a cramdown works; you get to keep your car at the conclusion of the Chapter 13 repayment plan even though there is a remaining balance on your loan. And you won’t have to make any additional payments. 

Chapter 13 Bankruptcy Basics

When filing personal bankruptcy, individual debtors typically choose either Chapter 7 or Chapter 13. As Chapter 7 bankruptcy involves a full discharge of debts held by unsecured creditors, those who qualify generally choose this path to debt relief. However, if your income is too high, and/or you have significant secured debt, Chapter 13 is typically a better solution. 

In Chapter 13 bankruptcy, you will enter into a three-to-five year repayment plan, which will include all or most of your secured and priority debts, and any remaining unsecured debt, such as credit card debt, medical bills, and collections accounts. Unsecured debt that isn’t fully paid off by the time the repayment period ends will be discharged, and no further loan payments will be necessary. 

Upsolve User Experiences

1,892+ Members Online
bryant graham
Bryant Graham
★★★★ 5 days ago
Upsolve was very helpful i highly recommend there service.
Read more Google reviews ⇾
Keith Vincent
Keith Vincent
★★★★★ 5 days ago
Upsolve provides a invaluable service at no cost. The clerk of court told me all of my paperwork was in order. It was done by myself with the assistance of Upsolve staff. Great Service for the people of this country. Thank you Upsolve.
Read more Google reviews ⇾
Andrew Morales
Andrew Morales
★★★★★ 6 days ago
Exceptional Service and Support - A Lifeline During Bankruptcy I am delighted to share my heartfelt gratitude for Upsolve and the exceptional assistance they provided my wife and me during our bankruptcy filing. Their expertise, kindness, and user-friendly platform made an otherwise daunting process remarkably simple and accessible. From the moment we engaged with Upsolve, their team exhibited an unwavering commitment to helping us navigate the complexities of bankruptcy with ease. Their knowledge and professionalism were evident at every step, and they went above and beyond to ensure we felt supported and understood throughout the entire journey. Upsolve's user-friendly platform was a game-changer, simplifying the otherwise overwhelming paperwork involved in bankruptcy filings. Their intuitive interface guided us through each necessary form, reducing confusion and streamlining the process. Thanks to their comprehensive resources and guidance, we were able to complete the filing accurately and efficiently. What truly set Upsolve apart was their empathetic and caring approach. The Upsolve team was always available to address our questions and concerns promptly, providing clear and compassionate explanations that put our minds at ease. Their commitment to accessibility is commendable, particularly for individuals like us who couldn't afford the services of a lawyer. Upsolve made bankruptcy filing a viable option for those facing financial hardships, providing much-needed support to those who need it most. While we have just completed the filing process and await the final outcome, we are confident that Upsolve's expertise and meticulous assistance will yield positive results. However, regardless of the outcome, we are eternally grateful for their invaluable help. They have given us hope and a fresh start, empowering us to take control of our financial future. If you find yourself in a similar situation, I wholeheartedly recommend Upsolve. Their commitment to making the bankruptcy process more accessible, their exceptional support, and their user-friendly platform make them an unparalleled resource for anyone in need. Thank you, Upsolve, for being our guiding light during this challenging time.
Read more Google reviews ⇾

How a Cramdown Works

Creditors who are paid back through a Chapter 13 repayment plan are paid pursuant to the terms set by the plan. As such, the debtor can propose a certain amount to pay each creditor, as long as the proposed amount and repayment structure meets Bankruptcy Code requirements. If, for example, you owe $18,000 on a vehicle that is only worth $12,000, you may propose a cramdown value of $12,000 to the bank. If the bank accepts your proposal, you’ve successfully crammed down your car loan and will repay that amount over the three-to-five year period of your plan. 

There are some requirements when proposing an amount for a cramdown. The first is that you must propose at least the vehicle’s fair market value. This is the amount that a dealership could reasonably expect to sell the vehicle for in its current condition, not the liquidation value used to assign a general value to assets in a Chapter 13 bankruptcy. Secondly, you must pay the minimum interest rate, which is the current prime rate plus risk adjustment. 

Once the creditor accepts the proposed cramdown amount and your plan is confirmed, terms are binding. Any balance remaining at the completion of your repayment period will be discharged. At this point, the bank will provide the filer with a free and clear title to the vehicle, via a cramdown. However, it is always a good idea to set a reminder to follow up with your lender once your Chapter 13 has been discharged. Banks may not automatically provide you with a clear title. 

Timing Rules

Not all secured loans with an outstanding balance greater than the value of personal property are eligible for cramdown. There are certain timing rules used to determine eligibility. These are as follows: 

The purchase cannot have been too recent. Any debt incurred for the purpose of purchasing a vehicle is subject to the 910-day rule which states that the car loan has to be at least 910 days old to qualify. Loans for property other than vehicles must have been incurred at least one year prior to filing. This is, not surprisingly, known as the one-year rule. 

There is an exception to the 910-day rule on vehicles, however. If you rolled negative equity from a trade-in vehicle into the new loan, the negative equity portion can be crammed down as it’s not part of the purchase price. Any remaining balance will need to be paid in full. 

What If the Secured Creditor Objects

Simply being eligible for a cramdown doesn’t mean your lender will approve the request, however. In some cases, a creditor will object to the proposal for a cramdown. Generally speaking, there are three reasons why this may occur. These are: 

  • The creditor believes that the value of the property is greater than the proposed amount.

  • The creditor believes that the proposed interest rate is too low. 

  • The debt incurred to purchase the vehicle is less than 910 days old. 

When the issue pertains to one or both of the first two reasons above, filers and creditors are often able to negotiate a resolution that makes all parties happy. When this isn’t possible, however, the court will make a final determination as to the vehicle’s fair market value and proper interest rate. Since it would typically cost the creditor more in legal fees than the benefit they might get from pursuing the issue further, the creditor usually accepts the court’s determination and signs off on the order. 

Cramdown For Real Property

We’ve talked about loans for vehicles, but what about real estate? Unfortunately, first mortgages on your primary residence are not eligible for a Chapter 13 cramdown, even if you’re upside down on your mortgage. If you owe more on your primary home than it is actually worth, you can’t reduce the outstanding balance to fair market value in a Chapter 13 repayment plan. 

If, however, you have an unsecured second mortgage on your primary residence, you may be able to strip that lien completely. 

Upsolve Can Help

If you have a car loan with a balance that is significantly higher than the car’s value, your car payments may be prohibitively expensive, and a cramdown may be of benefit. If you qualify for both Chapter 13 and Chapter 7 bankruptcy, however, the decision to go with Chapter 13 for the sole purpose of a cramdown should be driven by substantial cost savings and/or a strong desire to avoid repossession. Otherwise, filing Chapter 13 might not make sense. Upsolve is a nonprofit organization that provides resources to low-income debtors who are considering bankruptcy. On our website you will find extensive, easily-digestible information on bankruptcy and the disadvantages/advantages associated with each type. 

If you decide to file Chapter 13, it is in your best interest to work with a law firm; Chapter 13 bankruptcy filing is a complex process. A successful outcome is dependent on extensive knowledge of local laws and regulations that generally requires legal advice from an experienced bankruptcy lawyer. If, however, you decide to file Chapter 7, Upsolve offers a Chapter 7 filing tool that allows you to generate and file your bankruptcy forms entirely for free. For more information on bankruptcy and the many different debt relief solutions available to you, visit Upsolve today. 

Written By:

Amy Carst


Amy Carst is a writer, human rights activist, and speaker. She has written for US News & World Reports, Vice, and various Vermont news publications. She writes for multiple law firms and human rights organizations and studied law until she realized she’d rather write for attorney... read more about Amy Carst

Attorney Andrea Wimmer


Andrea practiced exclusively as a bankruptcy attorney in consumer Chapter 7 and Chapter 13 cases for more than 10 years before joining Upsolve, first as a contributing writer and editor and ultimately joining the team as Managing Editor. While in private practice, Andrea handled... read more about Attorney Andrea Wimmer

It's easy to get help

Choose one of the options below to get assistance with your bankruptcy:

Free Web App

Take our screener to see if Upsolve is right for you.

Take Screener
11,416 families have filed with Upsolve! ☆

Private Attorney

Get a free bankruptcy evaluation from an independent law firm.

Find Attorney

Learning Center

Research and understand your options with our articles and guides.

Go to Learning Center →

Already an Upsolve user?

Read Support Articles →


    + Show Articles

    Upsolve is a 501(c)(3) nonprofit that started in 2016. Our mission is to help low-income families who cannot afford lawyers file bankruptcy for free, using an online web app. Our team includes lawyers, engineers, and judges. We have world-class funders that include the U.S. government, former Google CEO Eric Schmidt, and leading foundations. It's one of the greatest civil rights injustices of our time that low-income families can't access their basic rights when they can't afford to pay for help. Combining direct services and advocacy, we're fighting this injustice.

    To learn more, read why we started Upsolve in 2016, our reviews from past users, and our press coverage from places like the New York Times and Wall Street Journal.