Mobile and Manufactured Homes in Chapter 13
At the Sellers Law Firm, our Montgomery bankruptcy attorneys spend part of almost every day working with many debtors who have a mobile or manufactured home and want to file a Chapter 13 debt consolidation case. Its simple fact that many of people of Alabama live in these homes. After they purchase the homes, most of the homes quickly depreciate, yet the balance owed on the note is far more than the value of the home. Many of these debtors have heard the term “cramdown,” but may not know exactly what it means or how it can likely benefit them in their Chapter 13 case. The basic legal definition of a cramdown is when a debtor files for Chapter 13 debt consolidation, and that debtor is attempting to cramdown the loan. The cramdown portion is when the debtor is attempting to only pay for the value of the property and not the loan amount. This occurs when the debtor has negative equity in the property. If a creditor objects to the terms of the modification, or of the cramdown, then the court will have the final say on the terms of the reorganization in the debt consolidation plan. The cramdown comes from the fact that the debtor has the ability to cram the loan down the throats of the creditors. I's not an elegant term, but it's useful and beneficial to debtors. It reduces the balance owed to the value of the property which secures it. Cramdowns can be applied to mobile or manufactured homes, automobiles, and personal property.
Mobile and manufactured homes have traditionally been classified as personal property. This is due to the origins of mobile homes being related to travel trailers. Under Alabama Law if it arrived with axles it is considered personal property. Many creditors contested this after the Bankruptcy Abuse and Consumer Protection Act of 2005; however, creditors were unsuccessful in Alabama in changing the laws that classify mobile homes as personal property. Each state has its own peculiarities of how to treat a cramdown, and this article addresses only the way Alabama state law addresses mobile homes and new manufactured homes. There are certain qualifications that a debtor must meet in order to cramdown a mobile home loan. First, the mobile or manufactured home must be on a separate note than the property on which it sits. If a mobile home or manufactured home and the land is financed on one loan, then this counts as real property and it is not eligible for a cramdown. Second, you must have purchased the home at least more than 910 days before the filing of your Chapter 13 debt consolidation plan. Third the mobile home must be valued according to NADA guidelines for less than is owed on the loan of the home.
Many people purchase a mobile home or manufactured home believing that the prices will go up as do real estate prices for “stick built homes” and land; however, mobile and manufactured homes will depreciate in value as the years go by much like an automobile depreciates in value. Factors such as age, the manufacturer the type of home, upgrades and options, and wear tear are all factored into the appraisal of the mobile or manufactured home. Most courts in Alabama use NADA guidelines in valuing a manufactured or mobile home, or Courts will accept an actual appraisal of the home after inspection by the appraiser.
At The Sellers Law Firm, we appreciate the complexities of cramdowns and are here to answer any questions that you may. We have four conveniently located offices in Montgomery, Selma, Greenville, and Troy. All consultations are always free, and we can usually see you within 24 hours. You can set an appointment to see one of Montgomery bankruptcy lawyers by calling 334-LAWYERS (529-9377). You can also use the “text us” link or Contact Form on our website. Remember that doing nothing, changes nothing so act today!