Filing Chapter 13 Bankruptcy on Multiple Investment Property

If you own a multiple investment property you can file a chapter 13 bankruptcy on investment property to reduce the principal mortgage balance to the current market value of the property.  This is called cramming down on your properties.  As direct result of cramming down on your investment property will enable you to have a fair market value while maintaining positive cash flow.  If your properties are your sole means of income, then the chapter 13 bankruptcy will be of use to you.  However, if the properties are just an extra investment properties then a bankruptcy trustee will most like not approve of your intent to cram down.

The Rules for Filing Chapter 13 Bankruptcy on Investment Property

There are certain restrictions placed on filing a chapter 13 bankruptcy if you have multiple investment properties.  In fact, many multiple property investors often opt to file for a Chapter 11 bankruptcy instead.  Nonetheless, a Chapter 13 bankruptcy is also considered a “mini chapter 11” because it allows you as an investor of multiple properties to repay a reasonable amount of money back to your creditors while simultaneously enabling you to keep your property while making payments under a proposed plan. 

Under a Chapter 7 bankruptcy all property would be seized in order to settle the debts owed.  But under a chapter 13 you can actually keep your multiple investment properties while paying down what you owe.  By you actually paying on your debts as proposed by a plan, you are providing yourself with a certain amount of leverage.

Once you file for a Chapter 13 bankruptcy, you can:

• Instantaneously cure any mortgage defaults against your properties for anywhere between 36 and 60 months.  Curing your defaults basically means reinstating your mortgage loans. 
• You can also eradicate junior liens on your mortgages in order to better restructure your mortgages.  This not only re-establishes your credit with each time that you pay, it enables you to get back on track with ease. 
• Another added perk of a chapter 13 bankruptcy is after 36 months of sticking to your payment plan, all of your dischargeable unsecured debt will be discharged.

Getting Help

In order to better understand how a Chapter 13 bankruptcy can help you save your multiple investment properties, you should consult with a bankruptcy attorney.  A bankruptcy attorney can better assist you with the fine print of a Chapter 13 bankruptcy on investment property, as well as both the perks and the perils of filing such.