When you were in a more financially fit place in life, you may have bought a rental property to serve as a secondary source of income. Or, more seriously, you may rely on your rental property as your primary or sole source of income. This may make you hesitant to turn to bankruptcy even during a severely financially troubling time, as you may be afraid to lose this property type in the process. Read on to discover how to keep your rental property in Chapter 7 or Chapter 13 and how a seasoned Louisville, Kentucky consumer bankruptcy lawyer at Schwartz Bankruptcy Law Center can work on your case.
What constitutes a rental property under bankruptcy law?
In a Kentucky bankruptcy case, a rental property is considered an asset and a source of income. As another way to put it, any real property you rent out to tenants may constitute a rental property. Or, any real property that does not serve as your primary residence. More specific examples may include houses, apartments, commercial spaces, multi-unit buildings, and storage units, among other real properties.
Can I keep my rental property in a Chapter 7 or Chapter 13 bankruptcy filing?
You must prepare for the possibility that your rental property may be treated differently than the property you use as your primary residence throughout your Chapter 7 or Chapter 13 bankruptcy proceedings.
For one, a Chapter 7 bankruptcy filing entails what is known as a homestead exemption. This may allow you to protect up to $5,000 worth of equity in any real or personal property you use as your permanent residence in the state of Kentucky. Unfortunately, since you may not use your rental property as your primary residence, it may not qualify for this exemption. However, there is also what is known as a wildcard exemption. This may allow you to property up to $1,000 worth of equity in any real or personal property. Now, this may apply to your rental property.
As you may have already realized, the equity protection found within a Chapter 7 bankruptcy filing may not have significant monetary value. This is why you may sooner turn to a Chapter 13 bankruptcy filing. Here, you may incorporate your rental property into your three- to five-year repayment plan. This is to say that you may use this plan to catch up on your missed monthly mortgage payments for your rental property, all without the worry of losing it in the process. If you pursue this path, though, you must be sure that the value of your rental property is worth saving.
In conclusion, you must deeply reflect on the gravity of the matter at hand. Once you do, you must drop everything and reach out to a competent Louisville, Kentucky consumer bankruptcy lawyer at Schwartz Bankruptcy Law Center.