Eric A. Lanigan Foreclosures Law Blog on Lawyers.com

A Cramdown Can Lower Investment Property Debt

Saturday, May 5, 2012 by Eric A. Lanigan

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Don't Lose a Rental Property to Foreclosure
A cramdown is a tool that the bankruptcy court has available to modify the amount owed on a secured debt—other than a mortgage or similar debt on a primary residence. 

Nearly five million Americans have lost their homes to foreclosure since the housing bubble popped between 2007-12, according to the  New York Times and about 3.5 million are in foreclosure proceedings. But the worst is yet to come.

In September 2011, a U.S. Senate Banking subcommittee heard testimony from a prominent mortgage industry analyst that 10.4 million mortgages, approximately one out of every five outstanding mortgages in the country, could default, if Congress does not take action to address the housing crisis.

A secured debt is one where property is used as collateral to secure a debt; if the debt isn’t paid, the creditor gets the property.

In a Chapter 13 rental property cramdown, the secured debt, i.e., mortgage on a rental, income, or investment property is reduced to the property’s market value, which is, after all, all the secured creditor could count on recovering if it had to foreclose.

The cramdown is available for any sort of secured debt other than for the primary residence. It’s most commonly used for vehicles which depreciate to be worth less than their loans, as well as income or investment properties where there’s been a market downturn and the property is worth less than the loan(s) on it.

Orlando bankruptcy attorney Eric Lanigan or Roddy Lanigan will be able to tell you after hearing your debt story what you should consider doing to get rid of credit card, medical bill, mortgage and equity line debt. A Chapter 13 may be the answer but to find out be sure to consult with them and learn what your options are.  Visit the Winter Park, Florida, office after setting an appointment at Lanigan and Lanigan.

 
Posted at 00:00 AM
Topic: Foreclosures
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