BANKRUPTCY AND REAL ESTATE
Chapter 7 and Real Estate
In Chapter 7, the question of “Can I keep my house?” hinges on whether the equity in your house is within either state or federal exemptions. For most people in financial distress, there may be little house equity. In these cases, you can keep your house provided you are current on mortgage payments and you can remain current on mortgage payments in the future.
If you are unable to make current mortgage payments, Chapter 7 would be an excellent option for surrendering your house to the lender and discharging any mortgage deficiency (the amount by which the outstanding mortgage balance exceeds the value of the house).
Chapter 13 and Real Estate
One of the most common reasons for choosing Chapter 13 is to protect a house from foreclosure. If you have fallen behind on mortgage payments and the house would be lost in foreclosure, Chapter 13 will provide time for you to catch up on past due mortgage payments while staying current on regular monthly payments. When filing Chapter 13, the option may also be available to strip off a wholly underwater (i.e., no equity) second mortgage or home equity line of credit, which can make paying the first mortgage much easier.
If the value of the house has fallen below the outstanding mortgage balance, filing Chapter 13 to keep the property may not be the best economic decision.
Chapter 11 and Real Estate
In Chapter 11, the mortgage on a commercial or investment property can be reduced to the value of the property. This can amount to substantial savings if the real estate value has dropped in recent years.
Chapter 11 can also be used to stop foreclosure and allow time to reorganize/refinance. Balbus Law Firm recently represented a real estate developer in Chapter 11 who was seeking to avoid foreclosure and buy time to reorganize/refinance his real estate holdings. Approximately 18 months after filing, his principal real estate asset received an offer almost 75% above appraised value.
To Understand The Consequences To Your Real Estate, Contact Us For a Free Initial Consultation
To learn about protecting real estate through bankruptcy in a free initial, call 203-286-4121 or email us.
Foreclosure may produce a mortgage deficiency which can be eliminated in bankruptcy. For a detailed explanation of the foreclosure process in Connecticut, see Foreclosure in Connecticut.
Balbus Law Firm is a debt relief agency. We help people and businesses in New York and Connecticut file for bankruptcy relief under the Bankruptcy Code.