Cram or Modify?

[UpsideDownMI]

What is the difference between a cram down (11 U.S.C. 1325(a)(5)) and modification (11 U.S.C. 1322(b)(2)) in a chapter 13? From what I understand alot of people use the cram down option which I feel I understand, but I found some plans on pacer that have modify as an option. This made me curious as to what the difference actually is, as they seem to be similar in nature. Thanks.

[BlueBayou]

Did you get a reply on this?

Brother is needing this info.

[HHM]

It's really two sides of the same coin.

1322 is broad in nature and merely states that you are "allowed" to modify. 1325 outlines in a little more detail the scope and limits of dealing with secured claims.

[justbroke]

If your speaking of mortgages, 11 USC 1325 specifically forbids the cramming down (or modification) of a debt secured by your primary residence. This is also known as the anti-modification clause in 1325(b).

So, if you're thinking of attempting this on your primary residence, it's a non-starter. Mortgage creditors are very keen and adept at fighting anything related to attempting to modify the terms of your Mortgage/Note if it's your primary residence!

Strictly speaking, I like to think of "modify" as in modifying the terms of the debt. For example, changing the percentage rate, accelerating or decelerating the term, or removing provisions (like arbitration clauses). (I specifically removed arbitration clauses from all my debt... using my Plan.)

I think of "cram down" as changing the amount of the debt to the market value. A "cram down" is a type of modification.

[UpsideDownMI]

Thanks JB! If you "modify" terms of a secured loan other than one on your primary residence, does that loan have to be paid off within the length of your plan? I know that if you do a "cram down" that is the case, but I haven't found anything related to a "modify".

As an example, say someone had a 5 year loan on a car and were in a 3 year plan, could the interest rate on that loan be modified without having to pay off the balance within 3 years?

[justbroke]

Thanks JB! If you "modify" terms of a secured loan other than one on your primary residence, does that loan have to be paid off within the length of your plan?

The consensus is yes, it needs to be paid off during the plan.

I know that if you do a "cram down" that is the case, but I haven't found anything related to a "modify".

Since a cramdown is a type of modification, it is the modification that requires you to pay the allowed portion of that debt to $0 by the end of the Plan.

As an example, say someone had a 5 year loan on a car and were in a 3 year plan, could the interest rate on that loan be modified without having to pay off the balance within 3 years?

No. You would have to pay off the loan during the 3 years. Think of your Plan as a "new binding contract". You must satisfy that contract within the time period allotted. Generally speaking, there are some debts which extend beyond the Plan duration, and those are usually mortgages. Hence, this is why mortgages are usually not modified (via a term modification or value cramdown) within the Plan!