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cfortunato
cfortunato, Attorney
Category: Bankruptcy Law
Satisfied Customers: 8023
Experience:  Bankruptcy professor.
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is there a way to file for bk and keep your rental property

Resolved Question:

is there a way to file for bk and keep your rental property? i have been told that we can keep the house (at market value) and rent it making payments for 5 years to pay off the market value and it is free and clear at that point, is this accurate? something about a 509 chapter,act addendum? please help
Submitted: 3 years ago.
Category: Bankruptcy Law
Expert:  cfortunato replied 3 years ago.

Hi JACustomer,

1) Is the mortgage(s) on the rental property more than the current market value of the property?

2) Do you have more than one mortgage on the rental property? If so, what is the market value of the rental property, and what are the balances on the mortgages?

Customer: replied 3 years ago.
there are 2 mortgages, the house is worth somewhere between 135K - 145K and we owe 297k on the 1st and 36k on the 2nd.
Expert:  cfortunato replied 3 years ago.

If you file a Bankruptcy, you can keep your rental property (the Bankruptcy court will not want to take it), since it has no equity. However, you will have to continue to pay the first mortgage, which cannot be "stripped" from the property. The second mortgage can be stripped if you complete the Chapter 13 (i.e., make all the monthly plan payments) for up to 5 years. This means at the end of the Bankruptcy, the balance on the second mortgage can be discharged, and the lien removed from the property.

I think this is what you wanted to know. If not, please let me know.
Thank you!

 



Edited by cfortunato on 2/2/2011 at 12:02 AM EST
Customer: replied 3 years ago.

Did you get the next question:

we were told that we could file 509 something (the first would be adjusted down to the market value) the second would go away and we could rent the house, make up the difference betweent the rent amount and the payment amount ad make payments for 5 years and the house would be paid in full. Is this accurate information as I am also told that the laws change all the time.

thanks

 

Expert:  cfortunato replied 3 years ago.
I have not heard of a 509 something. Is it something related to Bankruptcy? Or is something involved with your mortgage?
Customer: replied 3 years ago.
I'm told it's part of the chapter 13 which for landlords
Expert:  cfortunato replied 3 years ago.

1) Is the rental property owned by a business?

2) If so, what is the business form, and are you planning on filing a business Bankruptcy?

3) If you are planning on filing a personal Bankruptcy, what is your total unsecured debt besides the mortgage on the rental property?

Customer: replied 3 years ago.
The mortgage mentioned before is on the property in question, it is not owned by a business just me and my husbank and the bank of course. We moved out to try doing a short sale which didn't happen and now because we are renting we were told we could try the rental property and pay in 5 years. I'm jst trying to determine the validity of this since we have already been burned by one law firm/mortgate modification company costing us quite a bit of money and causing us to fall behind in the first place, so I don't want to just jump into somethine else without checking it out first.
Expert:  cfortunato replied 3 years ago.

What did you mean when you said, "we were told we could try the rental property"? It looks like "try" is the wrong word.

Also, who told you could have the mortgage removed if you pay for 5 years?

 

Customer: replied 3 years ago.
an attorney
Expert:  cfortunato replied 3 years ago.

Section 509 of the Bankruptcy code refers to co-debtors, and says nothing about mortgages.

It is not possible to get rid of a first mortgage or to reduce a first mortgage by filing a Bankruptcy of any type. However, a debtor can get rid of a second mortgage by filing a Chapter 13 Bankruptcy.

Last year Congress was given the opportunity to change this - to allow the unsecured portion of a first mortgage be discharged in a Bankruptcy - but they voted against it.

 

 



Edited by cfortunato on 2/2/2011 at 3:08 AM EST
cfortunato, Attorney
Category: Bankruptcy Law
Satisfied Customers: 8023
Experience: Bankruptcy professor.
cfortunato and 5 other Bankruptcy Law Specialists are ready to help you
Expert:  cfortunato replied 3 years ago.

L



Edited by cfortunato on 2/2/2011 at 3:11 AM EST

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