Protect Real Estate During Bankruptcy
Bankruptcy courts have the power to reshape debt, freeze transactions, or even allow a trustee to sell assets to repay creditors. That’s why it’s important to know what steps to take if you want to protect your real estate interests.
In this post, we’ll break down a few of the situations that commonly come up when real estate and bankruptcy intersect. We’ll also offer some practical points to consider when dealing with these issues, especially if you’re trying to preserve your investment or long-term plans.
Real Estate Owned By The Filer
If you’re the one filing for bankruptcy and you own real estate, your first concern is whether that property is at risk. Some real estate is protected by exemptions, meaning it doesn’t have to be turned over to a trustee. Other types of real estate—like a second home or investment property—might not have the same protection.
In a Chapter 7 case, the court may allow the sale of non-exempt property to repay creditors. In Chapter 13, you may be able to keep your real estate, but you’ll have to follow a repayment plan over time.
Real Estate Held In An Investment Portfolio
Those who hold real estate as part of an investment portfolio face a different set of risks. A bankruptcy filing may delay sales, block evictions, or pause rental agreements. Automatic stays freeze certain actions, and that can complicate income streams or pending deals.
Your real estate investment lawyer can help assess whether it makes sense to restructure ownership, modify contracts, or adjust the holding strategy based on how bankruptcy law applies.
Properties Subject To Foreclosure
Bankruptcy doesn’t erase a mortgage, but it can change the timeline of a foreclosure. Filing for bankruptcy generally puts an automatic stay in place, which means any foreclosure process must stop—at least temporarily. For some property owners, this pause creates an opportunity to catch up on payments or work out a deal with the lender.
However, if the lender later gets court permission to proceed, the foreclosure might continue. Whether that happens depends on factors like payment history, the type of bankruptcy filed, and how much equity is in the property.
Buying Or Selling During Bankruptcy
Real estate transactions during an active bankruptcy require court approval. If you’re trying to sell a property, you’ll need to show that the transaction is fair and in the best interest of all parties. If you’re looking to buy property from someone in bankruptcy, be prepared for delays and oversight.
Involvement Of Other Parties
Sometimes, multiple parties have a stake in real estate during a bankruptcy case—business partners, co-owners, or lenders. These third parties may find themselves subject to court rules, even if they didn’t file for bankruptcy. In some cases, the court might approve a sale of jointly owned property or look at whether the other party has a legitimate claim to prevent it.
Legal Insight During Uncertain Times
Bankruptcy and real estate are two areas of law that can overlap in unexpected ways. When they do, small mistakes can have large consequences. Attorneys like our friends at Aptt Law LLC can attest to how quickly a situation can shift, especially when deadlines and court orders come into play.
Reach out to a trusted legal team today to schedule a consultation.