This article is meant to explain how real estate investors can benefit from the current market conditions through a Chapter 11 bankruptcy reorganization. Any non-homestead property mortgage can be reduced to the current market value. This is usually done by looking at websites like cyberhomes.com or zillow.com to get a starting off point. Should this become a fought issue usually the owner can then move forward with an appraisal.
After the value is settled you are then allowed to reamortize that amount over an additional term. What that means is if your original mortgage was for 30 years and you are 5 years into it, you can redo the loan over an additional 30 years which should substantially reduce your payment.
Another benefit is the interest rate. As of today the prime rate is 3.25%. This is important because your restructured mortgages in Chapter 11 can be based on the prime rate. The Supreme Court case In Re: Till states that courts are to look at the prime rate when determining new interest rates in bankruptcy. They are to take prime and add 1-3% for risk factors. Because the prime rate is so low now it is possible to get a totally reduced and restructured mortgage with a fixed 4%-6% interest rate.
Second and Third mortgages can also be completely removed if the value of the property is less than the first mortgage. This even applies to homestead properties. So if you can show that they are completely unsecured you can remove them and treat them just like a credit card.
Even though the economy is currently terrible for real estate investors it can actually be a benefit if used correctly. Because of the low market values and low prime rate it is a great time to consider a Chapter 11 reorganization if you are a real estate investor struggling to keep afloat. For more information on how Chapter 11 may help you please call me at (904) 521-9868, (386) 868-2650, or (407) 494-0665. You may also get more information at http://chapter11jax.com.