Bankruptcy Law Questions? Ask a Bankruptcy Lawyer Now.
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?
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.
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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.
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?
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?
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.