How Can I Protect My Rental Property If I File for Bankruptcy?
Are you currently considering a bankruptcy filing but concerned about how your current rental property will be treated in your bankruptcy case? There is no single way to explain how rental property is treated in bankruptcy cases because it will depend on the type of bankruptcy, including whether you are filing as an individual or as a business, and whether the homestead exemption will apply. One of our experienced South Florida bankruptcy attorneys can provide you with more information that can help you to understand more generally how rental property is treated in different types of bankruptcy filings, and we can speak with you directly about your circumstances.
Business Bankruptcy or Personal Bankruptcy?
One of the first issues to consider is whether you are planning to file for business bankruptcy or personal bankruptcy. In a personal bankruptcy case (also known as an individual or consumer bankruptcy), it may be possible to rely on the homestead exemption to protect the equity in your rental property, but even then, the homestead exemption will only apply in specific circumstances that we will explain below. In a business bankruptcy, the status of your rental property will depend on whether the rental property is part of your business, and whether you are planning to file for a liquidation or reorganization bankruptcy.
If you are filing for business bankruptcy and want to keep your rental property, and that property is owned by or part of your business, you will need to file for a type of reorganization bankruptcy. And if the homestead exemption does not apply to the property in question in your individual bankruptcy, you will need to file for a type of reorganization bankruptcy, as well, if you want to keep the property.
Are You Planning on a Reorganization Bankruptcy?
Whether you are planning a business or individual bankruptcy filing, if you are planning to file for a type of reorganization bankruptcy, you will be able to retain your rental property, as an asset, as well as a means of income. Businesses will usually file for either Chapter 11 bankruptcy or Subchapter V bankruptcy (a subchapter of Chapter 11), while individuals will typically file for Chapter 13 bankruptcy.
In these types of bankruptcies, no liquidation of assets occurs. As such, your rental property will only figure into the value of your assets and the amount that must be repaid to creditors in your reorganization plan.
Homestead Exemption?
In an individual bankruptcy filing, Florida’s homestead exemption allows a homeowner to exempt all of the equity in their home, including in a Chapter 7 liquidation bankruptcy. However, this exemption is only likely to apply if you are only temporarily renting out your home and it is typically your primary residence.
Contact a West Palm Beach Bankruptcy Attorney Today for Assistance
Do you own rental property and you are considering filing for bankruptcy? If so, it is important to seek advice from a bankruptcy attorney in South Florida about how your assets will be treated in your bankruptcy case. As we explained above, the status of your rental property will depend on the type of bankruptcy you are planning to file for, as well as the matter of whether the homestead exemption is applicable to your case. One of the experienced West Palm Beach bankruptcy lawyers at Kelley, Fulton, Kaplan & Eller can speak with you today and answer any questions you have. Contact our firm for more information and to get started on your bankruptcy filing.
Sources:
leg.state.fl.us/statutes/index.cfm?App_mode=Display_Statute&URL=0200-0299/0222/0222.html
leg.state.fl.us/statutes/index.cfm?App_mode=Display_Statute&URL=0200-0299/0222/0222.html
