Many of the people who file bankruptcy in Las Vegas own not only underwater houses but also underwater rental properties that face foreclosure. Debtors in these circumstances are in a tough spot because while Nevada has generous homestead exemptions, rental properties are not so easily excluded from the bankruptcy estate. In reality, they rarely are, making them a commonly lost portion of the estate. Normally, foreclosure alone can take a few months to complete, but bankruptcy halts the process, forcing mortgagees to wait possibly a year until the proceedings can begin. Recently, the bankruptcy Trustee has found a new way of benefiting creditors (and his or her own commission) by handling rental properties differently.
(1) Instead of waiting for the foreclosure process to conclude, the Trustee sells the property to the mortgagee creditor for far less than the remaining value on the mortgage.
(2) The mortgagee benefits by not having to wait through the foreclosure process, and paying far less to initiate it. It gets the end result it would’ve gotten anyway: title to the property from the debtor, just a year or so earlier
(3) The other creditors benefit because the Trustee can take the proceeds from the sale and distribute them to the creditors. Normally, they would receive nothing because the rental property is secured and goes through foreclosure. This way, they get some money.
(4) The Trustee, of course gets his or her commission for increasing the value of the estate and distributing some of it to the creditors.
The plan hinges on the fact that the mortgagee creditor is willing to pay money to own the property now rather than wait for foreclosure to give it to them later. Often these savings can be quite substantial. The debtor, on the other hand, loses out because he or she could have been using bankruptcy to keep the property out of foreclosure and resume timely payments. The Trustee’s sale thwarts that plan.
It’s detailed situations like these that hiring an experienced Las Vegas bankruptcy attorney can help protect some of your assets, such as by filing in Chapter 13 rather than Chapter 7 or by signing a reaffirmation agreement to maintain ownership and continue paying on the mortgage.
For more questions about bankruptcy in Las Vegas, please feel free to contact an experienced Freedom Law Firm Las Vegas bankruptcy attorney for a free initial consultation. Call us at 1-702-745-8584 to set up your free consultation.