Can Chapter 13 Help Debtor With $ 1 Million Plus Mortgage

Here’s a question I received last week about using Chapter 13 bankruptcy to save an investment property and a primary residence from foreclosure.

"I'm in the midst of having two homes foreclosed on. One in an investment propert with a loan of 1.65 million and the other is my primary residence that was used as colalteral to get the loan (I do have a second mortgage for 250k on my primary home)....Would I be a candidate for Chapter 13?"

Chapter 13 bankruptcy is used mainly (but not exclusively) to stop foreclosures and to give the homeowner an opportunity to cure arrearage through a Chapter 13 plan. In this case, Chapter 13 may not work. Chapter 13 bankruptcy had debt ceilings. Debtors with secured debts greater than approximately $1 million are not eligible to file Chapter 13. There is also a debt ceiling for unsecured debts of approximately $300,000. People, like this debtor, who have secured debts exceeding the Chapter 13 ceiling may have to file an individual Chapter 11 bankruptcy to impose a repayment plan on the mortgage lenders. Chapter 11 bankruptcies are much more expensive and complicated than Chapter 13.

I do not think this debtor is a candidate for Chapter 13 because his secured debts far exceed the Chapter 13 ceiling. Disputed debt does not count in the debt amounts subject to the debt ceilings. Some attorneys have told me they have successfully filed Chapter 13 cases by disputing some of the filer’s debts in order to fit under secured or unsecured debt ceiling amounts.

posted by Jonathan Alper, bankruptcy and asset protection attorney, Orlando, Florida

Comments

[PAMELA HANFORD]

I AM BEHIND IN MY MORTGAGE 2 MONTHS. I DON'T WANNA GET FORECLOSED ON. WHAT SHOULD I DO? IS FILING BANKRUPTCY THE RIGHT THING FOR ME TO DO?