Chapter 13 California Bankruptcy Debtors Can Potentially Save Investment Properties In Bankruptcy

Posted by on Nov 16, 2011 in Chapter 13 Bankruptcy Issues, Foreclosure & Bankruptcy | 3 comments

The Bankrutpcy Law Network has an excellent blog on many bankruptcy topics.   Today, I will discuss one of the blogs titled: Chapter 13 can save an investment property – Lien stripping in action.

Chapter 13 California Bankruptcy Debtors often consider lien strips on their residences.  However, what happens with investment property?   Well, the same prinicples apply to investment property – you can strip a 2nd, 3rd, 4th etc position lien on underwater property.  However, you can even cram down the value of the 1st mortgage to the value of the underwater property – which is something you cannot do with your prinicpal residence – that’s because 11 USC 1322 does not allow one to cramdown the value of a first mortgage on a principal residence.

However, something else that is critically important is this:

While it is possible to strip a 2nd mortgage on underwater investment properties, what does that mean to say it is now “stripped.”  It sounds great, but it does not mean the lien just vanishes away.  In fact, the lien only changes status from secured to unsecured.  So how much do you have to pay back towards the stripped liens?  Well, the answer depends on 2 things: (1) your household income levels; and (2) how much stuff you own (real property & personal property) in excess of what is allowable in bankruptcy.

It is even possible one holds too much secured or unsecured debt and must file chapter 11 where there are mutliple investment properties at issue.  Currently the secured debt limit for chapter 13 filers is $1,081,400 and the unsecured limit is $360,475.

At JCH Law Firm, we help chapter 13 California bankruptcy debtors determine their best course of action in and out of bankruptcy.  Our office is located in the heart of LA County in Alhambra, CAlifornia.  Southern California Bankruptcy Attorney Jeffrey Hsu of JCH Law Firm can help clients across Southern California.   Call us today toll free at 626-999-5959 for your free consultation.

 

 

3 Responses to “Chapter 13 California Bankruptcy Debtors Can Potentially Save Investment Properties In Bankruptcy”

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