Blog

Feb
07
Bankruptcy Offers Options for Cramming Down on Rental Property Debt

Bankruptcy offers a number of options for people struggling to make ends meet. Many people have found a reprieve from their debts using Chapter 13 to reorganize their debts and make them more affordable. Chapter 13 bankruptcy has become very popular for homeowners after the burst of the real estate bubble when many homeowner found themselves in houses that were worth only a fraction of what they owed on them.

With household incomes cut, people were able to utilize Chapter 13 bankruptcy for stripping off a second mortgage on their homes. Unfortunately, this process is only available for a family’s primary residence.

Individuals who thought they were securing their family’s future with a real estate investment found themselves in the same situation as homeowners, owning property that was worth less than what was owed on it. What many individuals do not know is that bankruptcy may help debtors save investment property in Chicago

Chapter 13 bankruptcy allows people to “cram down” the debt of a secured asset to what the asset is worth rather than what is owed. It is not uncommon to use a Chapter 13 to cram down what must be paid on their car.

For an investment property, this means a mortgage company holding the note on the investment real estate can be forced to accept the property’s fair market value instead of what is owed on the property.

To make this happen, an experienced bankruptcy attorney will need to work to convince the bankruptcy trustee to order the mortgage company holding the note on the investment property to accept the lower market value. Once this has been done, the mortgage company will not have a choice and will be forced to accept the fair market value of the property.

It is important to note the property must be paid in full through the course of the Chapter 13 plan. Chapter 13 plans may last anywhere from 36 to 60 months. Typically, a cram down of investment property will require the plan to be 60 months.

Finally, once the payment for the Chapter 13 plan has been established, an individual cannot miss a payment. Missing a payment could eliminate the protection of the bankruptcy court.

If you are looking for solutions to save your investment property, you should speak with a Chicago bankruptcy attorney to review your options.


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In order to provide convenience for clients throughout Chicago and Northern Illinois, we have offices in the following locations: 

Chicago • Schaumburg  • Oakbrook • St. Charles • Naperville • And More

Locations

We have office locations throughout the Chicago Area:

Chicago (Downtown)

Schaumburg

Oak Brook

Naperville


All calls are routed through our Downtown office for your convenience.

Phone: 312-967-3159

Locations

We have office locations throughout the Chicago Area:

Chicago (Downtown)

Schaumburg

Oak Brook

Naperville


All calls are routed through our Downtown office for your convenience.

Phone: 312-967-3159

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