Bankruptcy Filing Guide: Will I Lose My Rental Property?
Options to Get Debt Relief Through Bankruptcy Protection
When you’re ready to file for bankruptcy, you are likely struggling so much to handle your financial obligations that you don’t want to have to give up any of the things you have going well for you – like the house you’ve been paying on and building equity or the rental property that’s actually been generating a bit of income for you.
Don’t let fears that the few assets you do have will be seized to satisfy your creditors if you file for bankruptcy. Talk to a Phoenix bankruptcy lawyer to better understand how the rules will apply to your specific situation.
Chapter 7 Bankruptcy
If you file for Chapter 7 bankruptcy in Mesa, you are allowed to keep some of your assets. Bankruptcy law allows you to keep a certain amount of equity in your property. So, if you own a house, you don’t have to worry about losing the house if you haven’t built up that much equity in it.
Rental property is different. It is not included in the exemption. However, it may still be safe from your creditors if you don’t have much equity in it. Creditors are going to have to spend money to seize and sell your property, and if the cost of doing that is more than what they are going to get for it, they likely won’t bother. The same is true if the amount would be a net positive, but not a very big one.
Alternately, your Mesa bankruptcy attorney may advise you to use the wildcard exemption to protect your rental property. This exemption can apply to any personal property up to a certain amount. Your attorney will let you know how much it is and how it can be applied.
Chapter 13 Bankruptcy
You have a lot more flexibility when you file for Chapter 13 bankruptcy in Phoenix. You don’t have to meet any standards for income, and you don’t have to give up any property. You can hold onto your house and your rental property.
Under a Chapter 13 bankruptcy filing, you restructure your debts under a repayment plan that the court determines you are able to afford. The repayment period lasts three to five years, and you make only one monthly payment that the court distributes among your creditors. You may end up paying less in interest and fees, and you could even have some of your debts discharged at the end of the repayment term.
If you are struggling to pay the mortgage on your rental property, Chapter 13 bankruptcy has additional benefits. The repayment plan can help you to get current on what you owe so that the property does not go into foreclosure. If you have taken out a second mortgage on the property and the amount you owe is now worth more than the property itself, you may be able to “cram down” the mortgage – meaning that the amount you owe over the actual value of the property could be discharged. You can get the property back to an affordable level, helping you to get a better handle on your debt and start turning a profit on the rent.
You have a lot of options to get debt relief through bankruptcy protection without having to give up assets such as your home or a rental property. A bankruptcy attorney in Phoenix can help you understand the best course of action to take to get the maximum debt relief available while also protecting the assets you want to keep. With the right attorney on your side, you can put together a filing that will help you get huge debt relief fast.
Call My AZ Lawyers today to talk with an experienced bankruptcy attorney about your options. We represent individuals in both Chapter 7 bankruptcy and Chapter 13 bankruptcy cases. A bankruptcy lawyer will discuss your goals and your concerns and analyze your finances to help you determine the best path forward. Once the right strategy is determined, your attorney will put together a strong and thorough filing to help you get a fast resolution. Our goal is to help you get out from under the crushing weight of your debt so you can rebuild your finances quickly. Call us in Phoenix today to schedule a consultation.
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Mesa, AZ 85202
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