A real estate investor is a person who invests in real estate and makes a living from the proceeds. For an insolvent real estate investor, Chapter 11 bankruptcy can be a fresh start from otherwise apparently impossible circumstance.
Chapter 11 bankruptcy is intended particularly for businesses, as well as for individuals with assets and liabilities that surpass the limit for filing Chapter 13. It is a debt reorganization plan that comes with an automatic stay upon filing. The automatic stay prevents all actions that creditors may take against a debtor. With a Chapter 11 bankruptcy, a real estate investor can stop foreclosure, stop repossession, stop bank account garnishment and stop creditor harassment.
The turbulent nature of the real estate market has forced many real estate investors to file Chapter 11 bankruptcy. There are many other reasons for real estate investors to consider Chapter 11 when faced with tough financial times.
Chapter 11 bankruptcy has many advantages for real estate investors, such as:
- it allows real estate investors to lesser loan limits to the current market value of the real property and to restructure that loan over a new tenure with a low, fixed interest rate.
- it instantaneously stops any legal proceeding against an individual, including foreclosure proceedings.
- it provides a period of time where no payments are made on unsecured debt and smaller payments are made on secured debt which allows individuals to save up a cash reserve to function.
- it allows individuals to restructure their unsecured debt, including unsecured second and third mortgages. Individuals have to pay back anywhere from 0% to 100% to their unsecured creditors depending on their particular circumstances. Even if 100% is required, it is paid back over a period of time with little to no interest and totally no penalties or late fees.
- it allows real estate investors to totally remove second or third mortgages from properties where the value is less than the first mortgage amount. The second and third mortgages are then considered as completely unsecured and discharged at the completion of the case just like a credit card balance.