New York Chapter 13 Cram-Downs Possible for Investment Properties, Not Necessarily Easy

November 14, 2012
>> Bankruptcy

Most bankruptcy debtors choose Chapter 7 because it allows them to quickly discharge their unsecured debts. They can keep their houses and cars through exemptions or reaffirmation agreements, but many people, particularly those with investment properties, want to choose Chapter 13 because it offers them the option to strip liens on underwater second (or greater) mortgages, and cram down car loans and mortgages for investments properties. Unfortunately, investment property cram-downs cannot always be so easily accomplished for a couple of reasons.

First of all, some debtors don’t meet the minimum disposable income requirements that are necessary to complete a Chapter 13 plan. If they don’t make enough money, they will be forced to file in Chapter 7, which does not afford them the cram-down option for any properties, movable or otherwise.

Secondly, Chapter 13 has debt limits for secured and unsecured debts. The amount of secured debts must be less than $1,081,400 and for unsecured debts the number is $360,475. Owners of investment properties often run afoul of the lower unsecured debt limit. Any amount that they want crammed down is considered unsecured debt, and what really complicates the matter is having an unsecured, underwater second mortgage on the debtor’s primary residential property that can be discharged. This means the debtor has to compromise by either keeping some debt on the mortgage (secured debt ceiling) or risk surpassing the unsecured debt ceiling.

There are other options, such as selling some of the properties to refinance the others, or filing in the more expensive and more involved Chapter 11.

Again, most bankruptcies don’t get this complicated, but in those rare circumstances that they do, it pays to have an experienced New York bankruptcy lawyer.

For more questions about bankruptcy, Chapter 13 debt ceilings, the automatic stay, effective strategies for dealing with foreclosure, and protecting your assets in bankruptcy please feel free to contact experienced Chapter 13 Bankruptcy Lawyer Brooklyn NY Bruce Weiner for a free initial consultation.

New York Bankruptcy Investment Properties, New York Chapter 13, New York Cram-Downs

Rosenberg, Musso & Weiner, L.L.P
26 Court St # 2211
Brooklyn, NY 11242, USA
718-855-6840
http://nybankruptcy.net/

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