Rental Property - Mortgage Cram Down - Reduce your principle balance on your mortgage loan
In a chapter 11 or 13 bankruptcy you may be able to reduce the outstanding principle balance on your mortgage loan to the current value of the property.
In today's economy many properties have seen a large decline in value; this includes rental and commercial property. Owners of owner occupied multi-family homes, rental property and commercial property can reduce the value of the outstanding principle mortgage loan balance.
Here is how it works:
Your property is currently worth $200,000;
You are behind on payment $10,000 (or better yet not at all);
You have a first mortgage of $400,000; and
A second mortgage of $50,000.
In this example you can
- Completely eliminate the second mortgage through your bankruptcy and never have to pay it again.
- Catch up the arrears on the first mortgage over a 60 month Court approved Plan; and
- Reduce the principle balance on the first mortgage from $400,000 to $200,000.
Note - that the actual monthly payment on the first mortgage loan will not change, however, since you are only paying back $200,000 and not $400,000 you will finish paying off your mortgage in a much shorter period of time.
If you have any questions please do not hesitate to e-mail or call.