Stripping off Real Estate Holdings in a Bankruptcy Case
During the real estate boom in the 2000’s, many of my clients purchased small groups of real estate holdings in Upstate New York or New Jersey. These were either multi-dwelling housing or small commercial businesses for $50,000 to $60,000 apiece. Aside from the rental income, many real estate investors mortgaged these properties during the real estate boom and obtained second mortgage or equity lines of credit to pull additional cash out of these properties.
Many of these properties were in semi-depressed areas that actually crashed during the 10 year recession. Many groups of properties became unrentable and many of my real estate investor clients defaulted on their mortgages on the properties, in addition to real estate taxes that were accruing as well as zoning violations and environmental violations.
Many of these properties are called “zombie properties” because the owners have stopped paying the mortgages on the properties, the tenants have vacated the properties, and the banks are taking years to actually foreclose on the properties and take possession of the properties.
Many of my clients, however, are still liable for the real estate taxes.
Under Sections 105 and 363 of the Bankruptcy Code, a person or company filing for bankruptcy may not only strip off the debt that has accrued on these properties, but may also force the banks to take ownership of these defaulted properties in order to stop real estate taxes, environmental and zoning violations to continue to accrue to the owner of these properties.
Therefore, a real estate developer may enter a bankruptcy case, keep the real estate investments that continue to make money, and strip off his prior debt and force the banks to take possession of the bad real estate properties.
CRAM DOWN ON INVESTMENT PROPERTIES.
As always, please feel free to contact me for a free consultation regarding your specific financial circumstances.
I have been practicing Bankruptcy Law, Business Law and Litigation for over 25 years.
The Law Offices of Allen A. Kolber, Esq. is a full service law firm that provides quality representation in the following areas:
- Bankruptcy Law and Litigation
- Business and Corporate Law and Litigation
- Foreclosure Defense
- Loan Modifications/Short Sales