Investing in real estate is a wise planning strategy for your future and financial security, enabling you to increase your equity in the property as you earn income. Unfortunately, these investments are not without their risks. Market fluctuations and economic factors can affect your success with rentals, as well as costs related to operating the property. You could fall behind on bills when you are not collecting sufficient rent to cover expenses, leading to serious financial struggles. In such a situation, you might wonder about options with bankruptcy and real estate investments in Athens, GA.

When you are struggling with debt and you worry about creditor efforts to collect, bankruptcy may be a solution. There are multiple types of bankruptcy available, including Chapter 7 and Chapter 13. Both proceedings involve the discharge of qualifying debt, but the laws could impact your real estate investments. You have worked hard to accumulate and manage your properties, so protecting your interests is a priority.

For the best possible outcome in safeguarding your real estate investments, retaining an attorney with in-depth knowledge of bankruptcy laws is essential. Not only must you determine whether Chapter 7 or Chapter 13 is the right fit, but you will need guidance with the process. You can trust your Athens, GA bankruptcy lawyer to develop a strong strategy, and some information should help you understand what to expect.

Basics on Secured Versus Unsecured Debt in Athens

When discussing the bankruptcy issues that affect real estate investors, it is first necessary to understand the nature of the debt. A secured debt is backed by collateral as an assurance that you, as the debtor, will pay. If you default on payments, the creditor can pursue its security interests through legal action. If you have an unsecured debt, you have not pledged any asset to secure the loan. A creditor does not have the same recourse for nonpayment, so you could encounter pressure, followed by threats, and then other legal action.

Concerning your real estate investments, likely, you have mostly secured debts in which the subject property is the collateral. The common strategy for real estate investors is to purchase through a home loan, and then use the income from rent to pay the mortgage and other expenses. Unless you paid cash, you have a secured loan on the property. While you may receive rent as income to sustain your investment, there are serious problems if you fall behind on payments to the lender. The bank could initiate foreclosure action, though you do have a reprieve through bankruptcy.

Overview of Bankruptcy Laws in Athens

Bankruptcy is a legal process that enables debtors to resolve debt through various options, including Chapter 7 and Chapter 13 cases. They are similar in some ways, including the basic steps in the proceedings. However, many aspects are different with these two types of bankruptcy for individuals in Georgia.

Chapter 7: You may file for Chapter 7 to discharge debt, so you emerge from the case without owing any amounts.to creditors. The benefits are significant, but you will need to realize two important points:

1. You must qualify under Chapter 7 bankruptcy rules, which focus on your income. The reason for the strict criteria for this type of case is that creditors may suffer a significant loss through discharging your debt. The rules aim to ensure that a filer is not abusing the bankruptcy process when they can afford to pay their debt.
2. Chapter 7 rules attempt to pay creditors what you owe. Therefore, the bankruptcy trustee will take control of your assets when you file. Through the liquidation process, your real estate and personal property could be sold to satisfy the debt. In many cases, the bankruptcy trustee will opt to not liquidate because the asset would not bring a significant return.

Chapter 13: If you do not qualify for Chapter 7, you can file bankruptcy under Chapter 13. Even those who do qualify for both might still consider Chapter 13 bankruptcy because there is no liquidation. The bankruptcy trustee cannot sell your assets, including any real estate investments. Instead of paying back creditors via selling your assets, you satisfy debt through a debt repayment plan. The monthly payment will be an amount you can afford, and you must pay for 3 to 5 years. Once you complete the terms, you can discharge the qualifying debt.

Eligibility for Two Types of Bankruptcy in Athens

The initial question you must consider when looking at Chapter 7 and Chapter 13 is whether you are eligible under the strict bankruptcy rules. As far as your debt, there is no limit to what you can discharge in Chapter 7. With a Chapter 13 case, you are disqualified if you have $2.75 million or more in debt, so most filers will be eligible. Concerning other specific qualifications:

• You may be automatically eligible for Chapter 7 if your wages are below the state median income level. If your earnings are above this threshold, you may still qualify under the Means Test that analyzes your income and monthly expenses.
• For Chapter 13, you must have a job to qualify. This is your source of income that ensures you can stay current on your debt repayment plan.

For both types of bankruptcy, you should be aware of the waiting time for filings that affects eligibility. If you previously filed a Chapter 7 case, you cannot file another for 7 years and must wait 4 years before filing Chapter 13. For a previous Chapter 13 case, you must wait 6 years to file a Chapter 7 bankruptcy and 2 years for another Chapter 13.

Bankruptcy and Real Estate Investments in Athens

Chapter 7 or Chapter 13 could be an effective solution for your debt struggles, but having ownership in real estate within your asset portfolio complicates the situation. To protect your interests, you will need an Athens bankruptcy attorney who has specific experience with real estate investments. Some important points include:

• In Chapter 7, you can only take advantage of the homestead exemption concerning the property where you live. Real estate investments do not qualify.
• Because real estate has considerable value for purposes of liquidation and paying back creditors, you can expect the bankruptcy trustee to sell it in Chapter 7.
• With Chapter 13, you have the advantage of rolling arrearages on the mortgage into your debt repayment plan. You can discharge these amounts, but not the mortgage, at the end of the case.

Handling of Other Debts in Bankruptcy

Your investments in real estate may be among the most important issues in a bankruptcy case, but debt related to this property is not the only factor. You can also discharge many other types of debt, including credit cards, medical debt, personal loans, and lines of credit. All unsecured debt is eliminated in Chapter 7, while there are some priorities to review in Chapter 13. Creditors with a higher priority debt will be able to receive a higher percentage of the monthly amount you pay through your debt repayment plan.

In addition, there are many debts that you cannot discharge under bankruptcy laws. Alimony, child support, certain taxes, and some lawsuit judgments will not be wiped out, so you will still owe these amounts.

How you Benefit from Bankruptcy

There are many advantages to working out debt through Chapter 7 or Chapter 13 when you have real estate investments among your assets. A benefit that affects you right away is the automatic stay in bankruptcy, which prevents creditors from taking legal action to collect the debt. You will not face foreclosure actions as long as the automatic stay is in effect. Note that a lender could request the court to lift the stay, in which case the bank could pursue you through foreclosure. Still, you have some time to get your finances together when the bar on legal action is active.

Another benefit to bankruptcy contradicts the myth that your credit will be destroyed. Chapter 7 and Chapter 13 cases remain on your credit report for 10 and 7 years, respectively. However, you emerge debt-free and can begin rebuilding credit right away. The 7- or 10-year period may be a shorter time than it would take to pay off debt without bankruptcy.

Legal Help with Bankruptcy and Real Estate Investments in Athens

One of the most important tasks when you are a real estate investor is to fully review your objectives when considering bankruptcy. If you intend to keep the properties through Chapter 7 or Chapter 13, you will need to develop a strong legal strategy. Guidance from a qualified legal professional is essential, so trust a Georgia bankruptcy lawyer to:

• Review your financial documents to determine the best solution based on your goals;
• Prepare and file the bankruptcy petition for Chapter 7 or Chapter 13;
• Assist with exemptions when possible to protect real estate investments;
• Help you develop the Chapter 13 debt repayment plan;
• Attend the 341(a) meeting with you, where creditors will ask questions about your bankruptcy petition; and,
• Obtain the final order from the bankruptcy court, discharging qualifying debt.

Discuss Options with an Athens, GA Bankruptcy Attorney Today

When you need legal support for bankruptcy and real estate investments in Athens, GA, it is critical to retain representation to advise you on strategy. If you are considering Chapter 7 or Chapter 13, please contact Morgan & Morgan, Attorneys at Law, P.C. in Athens, GA. We can schedule a no-cost consultation with a Georgia bankruptcy lawyer who will review your case and determine how to proceed.

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