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  1. #1

    Default Holding Negative Equity Property During Bankruptcy

    Situation: I will likely be foreclosed on my former FL home in near future. After foreclosure auction it will likely sell for significantly less than what I owe and since FL allows deficiency judgements, I'll likely have to file for bankruptcy.

    I also own an investment condo which is rented. The rent does not cover expenses and I can not sell the place for what I paid. There is no equity in it.

    Question: if i get foreclosed on former home, receive deficiency judgement and file for BK, what's going to happen to the rental property? Since there is no equity in it, i doubt my creditors would want it. I can cover the difference between the rent and the mortgage, (its not that huge). But if the BK trustee takes all my disposable income in Chp 13, then i will not be able to cover it. Would the BK trustee reduce the amount of disposable income they take from me each month in order to allow me to hold on to the rental property?

  2. #2
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    Default Re: Holding Negative Equity Property During Bankruptcy

    It's a secured property, and you can't discharge the lender's secured interest. You may be able to renegotiate the interest rate if it is excessive, but if there is no equity your most likely choices seem to be "keep it" or "sell it".

    Go to a bankruptcy lawyer before you are foreclosed - if you see that as inevitable, the sooner the better.

  3. #3

    Question Re: Holding Negative Equity Property During Bankruptcy

    I already met with a BK attorney. He told me not to file for BK prior to foreclosre if I don't want to hold onto either property (which is an option I am also considering). His reasoning was wait to see if there actually is a deficiency judgement from the foreclosure sale and whether the bank comes after me for it. Sounds like you may have a different opinion, if so why?

    I know filing a Bk prior to foreclosure will help you hang on to the property, but in this scenario what good does it do me? Does filing before foreclosure prevent a deficiency judgement?

  4. #4
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    Default Re: Holding Negative Equity Property During Bankruptcy

    If you wait to talk to a lawyer until after foreclosure has started, you lose the opportunity to act before the foreclosure process begins. Thus, whatever you decide to do (you being anybody in a similar position), you should consult the lawyer before foreclosure so as to keep your options open.

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