How to Keep Your Rental Property in Bankruptcy
I came across a nice article from another bankruptcy attorney on keeping your rental property in bankruptcy - http://www.megerdomianlaw.com/blog/?p=154. Here in Florida we have had an additional problem with Chapter 7 Trustees selling property that has no equity.
In cases we have had where the client owned investment property that was not claimed as exempt, but the debtor owed more than the property was worth, we have always assumed that the trustee would have no desire to take the property. However, a cottage industry developed in which investors would buy the trustee's interest in he property (the debtor's ownership subject to the bank's lien), then rent the property and fight the bank foreclosure. We saw one property sell for $8,000.00.
However, we have not seen this happen in the past few months. I have been advised that the Broward County Property Appraisor demanded taxes on all such sales and that made it too costly. In any event, we now caution all clients of this problem.
In Chapter 13 you can still 'redeem' investment property through the Chapter 13 Plan. That is, you can pay the value of the property rather than the loan amount. In Chapter 13 you are limited to five years, so you must be able to pay off the entire value in 60 monthly payments with interest (usually 5.25%). That may work well for a $50,000 condo rented for $1,000.00 per month. It may be impossible for a $200,000.00 rental home. A Chapter 11 allows for a longer plan, although that form of bankruptcy is more expensive.