Bankruptcy and Investment Properties

If you have investment properties, you are likely concerned about what will happen to your property if you file for real estate. When you want to keep more than essentials like a home, car, and household items, the bankruptcy court will examine your finances and investments very carefully. A bankruptcy attorney in Las Vegas can help you understand how bankruptcy will affect your holdings and what you can do to protect your investment properties while receiving a bankruptcy discharge.

Chapter 7 and Investment Properties

When you file for Chapter 7 bankruptcy, you will not lose any property that is protected by an exemption. You will need to surrender property that is not protected, which virtually always includes investment property. If you have a good amount of equity in an investment property, the trustee can take it, liquidate it, and distribute the proceeds to your creditors. While there is a homestead exemption in Chapter 7, this only applies to your primary residence, not a property owned as an investment or vacation home.

If you are underwater on the investment property loan and you are willing to surrender it, Chapter 7 may be a good option. In this case, the trustee will not take the property as any proceeds from a sale would go toward the lender holding the loan instead of other creditors. Chapter 7 allows you to choose how to handle secured debts, including debts secured by investment properties. You can choose to surrender the properties to creditors which eliminates your liability for the debt completely or you can reaffirm the debt if you wish.

Chapter 13 and Investment Properties

Chapter 13 bankruptcy allows you to keep your investment properties as you do not need to give up property. Instead, you propose a 3- to 5-year repayment plan to repay a portion of your debts.

Your investment properties will come up in several ways, though. The properties may increase your required payments as you must repay unsecured creditors (like credit card creditors) at least the value of non-exempt property, which includes any investment properties.

You may be able to pay off back payments, however. If you have missed any payments on your investment property loans, they can be rolled into what you owe in your repayment plan and paid back over three to five years. As long as you remain current on your plan, you can avoid foreclosure on investments.

You may even be able to cram down mortgages on investment properties. With a Chapter 13 bankruptcy, you can request that the judge reduce the mortgage balance on some types of investment properties down to the property’s current value. The downside is you must pay back the entire new loan amount during your repayment plan. If you owe a significant amount, a cramdown won’t help if you are suddenly left paying off $150,000 in just three to five years.

Contact a Las Vegas Bankruptcy and Investment Property Attorney

If you own investment properties and you are struggling under significant debt, filing for bankruptcy may be a good option. Depending on what you owe and the type of bankruptcy you chose, you may be able to retain your investment properties and even use bankruptcy to catch up on loan payments. Contact Las Vegas BK today for a free consultation with a bankruptcy lawyer in Las Vegas to discuss your options.