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Cramdown

A controversial procedure in bankruptcy wherein the court reduces a secured debt (i.e. trust deed or mortgage) to the current value of the property. The court actually splits the mortgage debt into two parts. The amount equal to the current value of the home is treated as a secured claim that the debtor must continue to pay. The portion of debt in excess of the property’s current value becomes an unsecured claim that’s usually not repaid in full.

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