Filing bankruptcy with assets can be very stressful. You want to know how filing for bankruptcy will affect those assets before you file so that there are no surprises. One type of asset that you might be concerned about is an investment property. Can you keep it if you file bankruptcy? Possibly, but most likely not without some consequences.
A Chapter 7 Bankruptcy is a liquidation of your assets. If your investment property has any equity in it all, meaning it’s worth more than what you owe on it, then your Chapter 7 Trustee will most likely want to take possession of the property. The Trustee will sell it, and then distribute the proceeds of the sale to your creditors after first paying off all mortgages and liens.
If your property is upside down, meaning you owe more on it that it is worth, then your Trustee MIGHT not go after it because they would get little if anything from selling it. HOWEVER, since all of your assets are liquidated in a Chapter 7 Bankruptcy, your Trustee can still choose to take possession of the property and short sale it. This applies even if you elected to keep the property and reaffirm the mortgage on your bankruptcy schedules. Continue reading →