A client asked me if she could reduce the principal balance of her mortgage thru Bankruptcy.
Bankruptcy has become my main practice now and I offer many resources on my website www.andresmontejolaw.com . Debtors should go there to see if I can assist them as a Miami Bankruptcy Lawyer.
To reduce your principal balance one must understand that it only applies to investment properties. It does not apply to your homestead.
The basic rule is that in Bankruptcy one can cram down the property to the actual value of the property and pay it over the plan period. Plan periods are typically 36 or 60 months, and it depends if your household income is below the state median or above. If it is above the state median, your repayment plan must be 60 months, if it is below it can be 36 months, however debtors typically in this category may choose to pay using the 60 month term.
So if we applied the basic rule, a property that is worth for example 100K but owes 200K could be crammed down to the 100K value, thus in a way forcing the principal balance reduction.
As a Miami Bankruptcy Lawyer – www.andresmontejolaw.com – the debtor must be aware that the basic rule must be applied cautiously, and using the assistance of an experienced attorney is encouraged.
The Basic rule to cram down your real estate property, which is like reducing your principal balance, only applies to your investment property, as other rules apply to your homestead property.
The second rule to cram down your property is that you have to be able to pay it off during the plan period usually 60 months. During the plan period you will also be required to pay an interest rate on the amount, currently 5.25%, as well as an administrative fee to the trustee which is typically 10%.
So let’s say you had an investment property that was currently worth 60K and you had a first mortgage of 100K and a second mortgage of 50K. Since the second mortgage has no equity this second can be avoided or discharged. The first mortgage can be reduced from 100K to 60K if you complete the plan payments. Using the 5.25 interest rate your payment for 60 months would be approximately $1,267 which would include the administrative fee.
One big caveat is being able to complete the plan. If you’re able to make those 60 payments of $1,267, at the end of the plan you would have paid off the crammed down portion of the debt, and you would then own the property free and clear. This would seem to be a good way to save money on your own, think of the potential upside of the property revaluating in that period.
On the other hand if you’re unable to complete your plan, your case could get dismissed, and all the benefits that you were thinking of getting could be lost.
You should not feel guilty about filing bankruptcy. Whatever the circumstances that have made it difficult for you to meet your obligations, it is better to seek relief in bankruptcy and return to a productive life than remain struggling with out-of-control debt. Come talk to us about your financial issues; we can help!
Take the first steps today to liberate yourself from debt! Contact Miami Bankruptcy Attorney Andres Montejo at 305-817-3677 for a free consultation. At the Miami Bankruptcy Law Offices of Andres Montejo, our fees are flexible, and under certain circumstances you can make payments over time.
The Law Offices of Andres Montejo is a debt relief agency as defined by the United States Bankruptcy Code. With offices in Miami, Hialeah and Fort Lauderdale
Andres Montejo practices in the following areas of law: Bankruptcy; Bankruptcy Chapter 7; Bankruptcy Chapter 11; Bankruptcy Chapter 13; Bankruptcy Litigation; Bankruptcy Reorganization; Commercial Bankruptcy; Bankruptcy Trustees Rights; Commercial Insolvency; Creditor Bankruptcy; Debtor Bankruptcy; Debt Relief; Foreclosures; Insolvency; Personal Bankruptcy
If you want a good Bankruptcy Lawyer a Miami Bankruptcy Lawyer, I recommend Andres Montejo. A majority of his practice focuses on helping people file for chapter 7 bankruptcy. He provides free information onMiami Bankruptcy Lawyer to help decide if bankruptcy is the right option for you and offer free phone, online, and in-person consultations.