Bankruptcy Options for Owners of Multiple Properties

Individuals who own multiple properties and who are faced with the prospect of bankruptcy are in a unique position when it comes to their ability to potentially keep the properties in question throughout the bankruptcy proceeding. In some cases, owners of multiple properties are in a better position with respect to the bankruptcy proceedings, but in other cases, owning multiple properties puts you at a distinct disadvantage. How can you determine what your best bankruptcy option will be if you are an owner of multiple properties? A quick look at the bankruptcy laws and types of bankruptcy will let you know where you stand and what type of bankruptcy is best for you.

Understanding Bankruptcy and Property

If you are filing for Chapter 13 bankruptcy, which is also known as a wage earner’s bankruptcy and which requires repayment of a portion of your debts over a period of time ranging from three to five years, you will be able to deduct the cost of operating or owning your multiple properties from the amount of income from the properties.

If you show a net loss, the properties can count as debt from the bankruptcy and may help you keep the properties. In addition, you can force your creditors to reduce the amount owed on your properties if the value of the property has depreciated to less than you owe on them, in what is called a cram down procedure.

If you are filing for Chapter 7 bankruptcy, and the mortgage payments and costs of operating the additional properties do not exceed the amount of income that you receive from them, you may fail the means test and end up having to file for Chapter 13 bankruptcy.

If you pass the means test and are eligible to file for Chapter 7 bankruptcy, you may lose the multiple properties as part of the seizure of your other assets which are then sold at auction to help repay some of your outstanding debt to your creditors. Very few individuals qualify for Chapter 7 bankruptcy because of changes in bankruptcy law which took place in 2005.

Getting Help

In any case, ownership of multiple properties may be a good or bad thing depending what type of bankruptcy you are declaring. Since most bankruptcies today fall under the Chapter 13 bankruptcy filing law, you will want to speak with a qualified bankruptcy attorney who can help you best protect and preserve your multiple properties during the likely Chapter 13 bankruptcy filing that you are planning to make.

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