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Irvine Bankruptcy Lawyer / Investment Property Bankruptcy

Bankruptcy is a process that offers financial relief to individuals who find themselves unable to pay off their debts. If you own an investment property and are considering filing for bankruptcy in Irvine, California, it is crucial to understand how the asset will be treated. Read on to understand investment property in the context of consumer bankruptcy. For help finding effective debt relief while protecting your valuable property in Orange County, Los Angeles or Southern California, contact The Law Office of Charles A. May for a free consultation with a skilled and knowledgeable lawyer.

How Is Investment Property Treated in a Bankruptcy Case?

In a Chapter 7 bankruptcy, your non-exempt assets are sold to pay off your creditors, after which any remaining unsecured debts, such as credit card bills and medical debt, are discharged. The key to a successful “no-asset” case is to exempt all of your valuable assets under the California bankruptcy exemptions so the bankruptcy trustee does not bother to take any of your property. In a no-asset case, you receive a discharge of debt without losing any property.

Investment properties are generally considered non-exempt assets, which means they could be sold to settle your debts. You might be able to keep your property under some specific circumstances, such as when there is not any equity in the property, or the trustee determines it is not worth selling. For instance, if the property is not especially valuable, or the timing of your bankruptcy is in a down market, the trustee could consider it not worth the trouble and expense to sell your investment property. If you do have some equity in the property, you might be able to exempt it by choosing the set of California bankruptcy exemptions that contains a wildcard exemption. Exempting your equity would further reduce the value of the property in the eyes of the bankruptcy trustee.

In a Chapter 13 bankruptcy, you propose a repayment plan to pay off your debts over a period that lasts either three or five years, depending on your level of disposable income according to the bankruptcy means test. By filing Chapter 13 instead of Chapter 7, you are more likely to keep your investment property, as the Chapter 13 trustee does not attempt to sell any assets. However, you will need to continue making regular mortgage payments, and the income generated from the property may affect your repayment plan.

If you are in default on the mortgage for your investment property, Chapter 13 can help you avoid foreclosure by helping you catch up on missed payments, and in some cases modifying first mortgages or removing second mortgages.

Pros and Cons of Keeping Investment Property

When deciding what to do with investment property in bankruptcy, it is important to carefully consider both the pros and cons of keeping the property in general and specifically regarding how it could affect your bankruptcy.

Pros

  1. Steady Income: If your investment property is generating positive cash flow, it could serve as a stable income source.
  2. Asset Appreciation: Over time, the value of the property is likely to appreciate, making it a valuable long-term asset.
  3. Rental Opportunities: Leasing your property can offer consistent revenue streams that can help you pay off your debts.

Cons

  1. Mortgage Payments: The monthly mortgage payments can be a financial burden.
  2. Management and Upkeep: Owning a property comes with its own set of responsibilities, such as maintenance and tenant management, which can be time-consuming and costly.
  3. Affects Repayment Plan: The income from the property might require a higher repayment amount in a Chapter 13 plan.

Contact The Law Office of Charles A. May for Help With Investment Property and Bankruptcy

The Law Office of Charles A. May is committed to providing expert guidance in consumer bankruptcy matters, helping residents navigate the complexities involved in their particular situation, including dealing with investment property. If you have questions or need assistance, we are just a call away. Feel free to reach out to our team to discuss your specific situation and explore the best way forward for you.

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