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Can I keep rental property in a Chapter 13 bankruptcy?

Tampa, FL |

I have two rental houses. Each house is about $15,000 underwater. The mortgage payment is $1,100.00 for each house. Rent income per house is $750.00. Maintenance expense per month is $50 for each house. Will I be able to keep these houses in bankruptcy even though the expense of keeping them is more than the rent income they bring in? I would like to keep them. In general can a person keep rental houses in bankruptcy or is it a luxury? Thanks!

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Attorney answers 4


Technically yes, but you will not be able to use the deficit between rent payments and mortgage to offset the monthly plan payment you have to make to your other creditors. In other words, you'd have to treat the rental property as "breaking even" when you calculate your ability to make monthly payments to your unsecured creditors.

This will likely leave you unable to make the mortgage payments on your rental property, but you can always try to do a loan modification or similar method to temporarily (or permanently) lower your payments on the rental property.

Or, if they are truly "underwater" as you state, you can partially reduce the lien and then reamortize the remaining loan over 60 months and pay it off through your Chapter 13 plan.

All the above assumes you meet the debt limits for Chapter 13 eligibility, which are presently $360,475 for noncontingent, liquidated unsecured debts, and $1,081,400 for noncontingent, liquidated secured debts.

Mark J. Markus, Attorney at Law
Handling exclusively bankruptcy law cases in California since 1991.


If your trustees are like ours, expect an objection based on good faith. If you are trying to keep the properties, but you have to pay more money that they are bringing in, you will likely be unable to propose a plan that can work.

[I am a Virginia-licensed attorney. This communication is intended as general information and not specific legal advice, and this communication does not create an attorney-client relationship.]

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People often ask if they can keep homes, second homes, cars, boats, tax refunds, etc., when they are contemplating Bankruptcy. I always tell them they can keep what they want of they can pay for it, or if the equity or value is protected by an exemption in their State!

There are two types of Bankruptcy for most individuals. Chapter 7 (liquidation) and Chapter 13 (payments are made to a Chapter 13 Trustee to be distributed pursuant to a Plan you and your attorney draft). To determine of you get to keep the property you have to know two things…

1) What is the equity in the property? (I.e., what is it worth minus what you owe on it).
2) Will the exemption laws that are applied to the property protect the equity?

Bankruptcy is much more concerned with equity than it is with debt. If you have no equity in a rental home the Trustee in a 7 or 13 does not have an interest in the property and you may keep it.

If you owe more on the vacation home than it is worth you may be able to use Bankruptcy to reduce the amount of the debt, and again, keep it.

When you have equity in something that is not protected by an exemption then that is an issue that a lawyer must evaluate. See an attorney right away before you act.

Good Luck!

REQUEST: Please give this answer a "thumbs up"(below) if you find it valuable.

Disclaimer: This answer does not constitute legal advice. I am admitted in the States of New York, New Jersey and Massachusetts only and make no attempt to opine on matters of law that are not relevant to those three States. This advice is based on general principles of law that may or may not relate to your specific situation. Facts and laws change and these possible changes will affect the advice provided here. Consult an attorney in your locale before you act on any of this advice. You should not rely on this advice alone and nothing in these communications creates an attorney client relationship. The opinions expressed herein are those of the author only and the fact that he has worked as an Assistant District Attorney; State Supreme Court Clerk; Special Assistant United States Attorney (Hawaii); Assistant Cornell University Counsel or Judge Advocate, United States Marine Corps should not be relied upon to assume that these statements reflect the policy of these organizations.


Wonderful canned answer Mr. Araujo. You added absolutely nothing to the conversation with no useful information. Especially with two very adequate answers in front of you.

Good job cleaning up 15 points on your way to a higher Avvo rating.

(I cleaned up 5 points pointing this out.)

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