Most Chapter 13 Debtors have secured auto loans that are in default. Because of the nature of motor vehicles, those loans are typically underwater (the amount due on the loan is more than the value of the collateral for the loan). The Bankruptcy Code allows a Debtor in a Chapter 13 Bankruptcy to “cram down” the Creditor’s loan to the value of the collateral.
When reviewing a Chapter 13 Plan, the secured creditor should make sure that the secured creditor agrees with the value given to the collateral by the Debtor. If the secured creditor believes that the value of the collateral is more than the Debtor’s value of the collateral, then the secured creditor should consider filing an objection to the Chapter 13 Plan.
In Colorado, the secured creditor should be aware that objections to the Debtor’s Chapter 13 Plan must be filed very early in the confirmation process – three Court days prior to the meeting of creditors. Often, a secured creditor will delay reviewing the Chapter 13 Plan, or delay referring the case to Colorado Bankruptcy counsel. Such delay could result in the secured creditor being precluded from objecting to a proposed Chapter 13 Plan.