Thursday, September 23, 2010

Real Estate Investors Can Benefit from the Terrible Economy


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.

Thursday, September 2, 2010

Special Rules Regarding Vehicles in Bankruptcy

     One reason many people choose bankruptcy protection is to save a vehicle from repossession or replevin.  Few people actually know that certain rules apply to vehicles when they file.  Most people only know they can keep their car.  In 2005 Congress enacted BAPCPA.  Included in the changes were specific rules dealing with automobile liens.  The most widely criticized and litigated of the automobile changes is the so called “hanging paragraph”.
     The “hanging paragraph” states that if you purchase a personal vehicle and file bankruptcy within 910 days you are not allowed to “cram down” the value of the vehicle.  This means that you would have to pay the full amount owed to the lien holder over the life of your Chapter 13 Plan.  Of course you can still reduce the interest rate and extend the term but sometimes that is not enough.
     Luckily in Chapter 11 cases the “hanging paragraph” does not apply.  This means that there are no time restraints on when you can value a vehicle and when you cannot in a Chapter 11 case.  However,  I am not telling anyone to buy a vehicle and file Chapter 11 a few days or even weeks later because there are still issues of whether the bankruptcy was filed in bad faith or issues of fraud to deal with.  Nevertheless it can be a real benefit for someone that is on the fence about Chapter 11 bankruptcy.
     Again I am not saying that everyone that has a vehicle purchased within 910 days should file a Chapter 11.  I am simply stating that it is an added bonus for people that choose or are forced into Chapter 11 bankruptcy.  Also please note that the “hanging paragraph” does not apply to business vehicles in any chapter of bankruptcy.
     Should you need more information or clarification please feel free to call or email me anytime.  My email is jason@cwbfl.com and web address is www.chapter11jax.com