Can Bankruptcy Stop Foreclosure on Investment Property

Bankruptcy Attorney Dayton, Oh

Many Ohioans utilize real estate investment to fund ventures such as their retirement. Many Dayton bankruptcy attorneys are asked if bankruptcy can stop foreclosure on investment properties the same way it can for a home in which your currently reside. The answer depends on your debt situation, how much property you own, the legal structure of ownership, and the type of bankruptcy that you file.

Recent Ohio Landlord Bankruptcy

The power of the automatic stay afforded by bankruptcy was recently demonstrated by an Ohio property owner who owned numerous real estate investment units. Having become severely behind on his property taxes, state and county officials closed in to force the man to either pay his delinquent property taxes or be forced to relinquish the property to the county government as payment. On the evening of the foreclosure sale that would have placed a number of his properties up for sale, he filed for bankruptcy protection. This action stopped the entire foreclosure process and tied the hands of the local tax authorities.

Differences in Bankruptcies

What happens to your property after filing an Ohio bankruptcy depends mainly on the type of bankruptcy that you file. If you are aiming to utilize bankruptcy to stop foreclosure on investment property, Chapter 7 bankruptcy is not for you. In Chapter 7 bankruptcy, the bankruptcy trustee will usually sell off any non-exempt property to pay back your creditors. Alternatively, Chapter 13 bankruptcy can help you save your property from a foreclosure sale; however, it may require you to pay back a more substantial amount of debt, as you must pay creditors back the amount of non-exempt property you own.

Single Asset Chapter 11 Bankruptcy

The Bankruptcy Code has a special provision for Chapter 11 bankruptcy cases where a single property with fewer than four residential units which generates a substantial amount of gross income is involved. In these situations, the Bankruptcy Courts may grant the creditors of the property relief from the automatic stay unless the debtor can provide an approvable plan for reorganization within 90 days. For this reason, it’s important to discuss your potential Chapter 11 plan with an Ohio bankruptcy attorney before filing.

Chapter 11 Bankruptcy and Property

By correctly setting up your real estate holdings in an LLC or corporation, you should be able to utilize Chapter 11 bankruptcy to protect your holdings effectively. Chapter 11 bankruptcy is an effective tool for businesses that manage property to continue to operate while attempting to reorganize debts with creditors. In many cases, property management companies can prevent foreclosure of their investment properties while continuing to generate income to fund a Chapter 11 bankruptcy. While no one ever expects to be forced into bankruptcy, its best to think about running out of money when you first begin acquiring investment properties.

Contact an Ohio Bankruptcy Attorney

Adverse actions in business and real estate can, and often do occur. If you rely on investment properties as a form on income and have recently encountered trouble paying debt obligations or are threatened by foreclosure, contact an Ohio bankruptcy attorney as soon as possible. Ohio bankruptcy lawyers are experts on debt relief and can assist you with saving your property and livelihood when threatened by the inability to pay taxes or secured debt payments.

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