A bankruptcy lawyer has the job of helping you to navigate this very challenging process. Going bankrupt is not an easy process and it does come with some loss. Even if you own very little, you will feel the pinch when you try to apply for new lines of credit or when you are facing significant difficulty with getting new insurance. However, if you own assets, such as rental property, before you decide to file, it is a good idea to work with your attorney to protect this property.
Chapter 7 and Rental Property
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Filing Chapter 7 is the process of asking the court to discharge any and all of your debt. This process is the most common for those with significant unsecured debt and very few valuable assets. You could file this option. However, because assets are sold in this form, you may lose your rental property if it has a high value compared to the mortgage on the loan. If nearly all of the value of the real estate is still under a mortgage, on the other hand, you may not lose it.
Chapter 13 and Rental Property
If your rental property is valuable, an option may be to use a different form of bankruptcy called Chapter 13. In this form, the bankruptcy lawyer will tell you, you do not lose any assets you own. Rather, you will spend between three and five years working to pay back what you owe to all of your lenders in a method that works for you. Some of your debt is still discharged after that period, though. If your property is valuable, this is the best option for protecting it.
You Don't Want to Keep It
In other cases, you may have property that is hard to rent or that may be too expensive for you. In the process of going bankrupt, you may be able to get rid of this debt. The court can seize the property and sell it in the hopes of raising some capital to split between your lenders. In other cases, the mortgage holder may foreclose on the property. If you do not want to keep it, the court will take it from you. This will make it hard to obtain a new mortgage loan in the years after you file, though.
When you work with your bankruptcy lawyer, he or she will guide you in handling this asset with care. If you want to maintain ownership, you should be sure to tell your attorney about the property and then to choose the chapter that allows you to maintain it. It may not be possible in all cases, but in many, it can be.
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