Can I keep my rental property if I file for bankruptcy?

Often, people ask, can I keep my rental property if I file bankruptcy? In many cases, the goal of bankruptcy is to liquidate as many assets as possible and to use those funds to repay creditors. The process ensures that the bankruptcy filer is given the ability to walk away from some of his or her debts, but the individual is also likely to have to hand over assets that are above and beyond what the bankruptcy trustee deems as protected under bankruptcy law.

Rental Property

In many situations, filing Chapter 7 bankruptcy will lead to the loss of rental property. If the rental property has a value that is lower than the homestead exemption and the state allows for rental property to qualify as a homestead exemption, it may be possible to protect that property, assuming other homes are under the exemption limit as well.

However, this is rarely the case. In most cases, in order to protect your rental property, you must do one of the following:

• Reaffirm the debt on the property and show your ability to continue paying on the debt, if the property does not have any equity.
• File Chapter 13 bankruptcy instead, which requires a repayment period but no loss of assets.
• Sell the property prior to filing bankruptcy.

Avoid trying to hide these assets or selling them to family and friends since this can also lead to complications.

Hire an Attorney

If you have questions like this, hire a bankruptcy attorney to help you through the process. The attorney will work closely with you to ensure that your property is protected if possible.