CHAPTER 11 AND 13 BANKRUPTCY DUE TO RISING RENTS?

A GREATER NEED FOR CHAPTER 11 AND 13 BANKRUPTCY DUE TO RISING RENTS?

            A recent article regarding rising rents served as a follow up to a blog that appeared on this site last year. http://www.nytimes.com/2014/04/15/business/more-renters-find-30-affordability-ratio-unattainable.html?hpw&rref=business&_r=0

In that last blog post, the rising home prices in many Florida cities appeared to be the result of investor hedge funds purchasing rental properties for cash. https://www.planlaw.com/is-the-american-dream-dead-in-jacksonville-fl/ That activity was causing a run up in the prices of homes which would typically be middle class living in many cities. The result was a loss of opportunity for home purchases and a greater need to save homes that are currently owned by middle class families.

Now, it appears that rents are rising to a level where they may be unaffordable for many middle class families. As with mortgages, the typical ratio for housing expense in rentals is approximately 30% of a household’s gross income. However, 50% of all renters now spend more than 30% of their gross income on rent. The problem appears to be getting worse as rents continue to rise due to a combination of low vacancy rates and low wage increases.

So what can the average homeowner do to escape the rising rental problem? Try to keep that house and avoid paying high rental rates seems to be the obvious solution. If you currently have a home that is behind and subject to foreclosure – the best solution may be to cure the arrearage on a primary residence with a Chapter 13 Plan or restructure an investment property with a Chapter 11. Chapter 13 can allow for a cure of all arrears over a 60 month period of time or by modifying the mortgage if the homeowner is eligible. Chapter 11 allows investment properties to be valued to the market value of the home even if the mortgages on the property are much greater than the value. Interest rates and maturity dates can also be changed on investment properties.

Saving a primary residence will allow the homeowner to avoid higher rental rates that may areas are experiencing now. If you currently are looking to save an investment property, then rising rental rates could be used to fund a Chapter 11 Plan to save the investment property for future retirement planning or other long term goals. Contact us to discuss your options.

At Mickler & Mickler, we attend Court on a regular basis. We have the experience and knowledge to ensure that you receive the correct advice when confronted with difficult financial decisions related to filing bankruptcy. Contact us at 904.725.0822 or bkmickler@planlaw.com.

 

Bryan K. Mickler