To the Editor:
Your article on the increase in investment property foreclosures [“Burned by Real Estate, Some Just Walk Away,” October 18, 2007] generally provided useful information to your readers, but was wrong in its closing advice-to avoid bankruptcy protection. As an experienced bankruptcy attorney (our caseload is rapidly increasing notwithstanding BAPCPA), filing for bankruptcy is alive and well, with 1 million cases expected to be filed this year, many resulting from real estate.
Filing for bankruptcy can have several important advantages for distressed real estate investors. Bankruptcy will discharge any liability for abandonment of real estate and will also discharge all loans, legal fees, bank fees and court charges related to real estate and other creditors. Additionally, the tax liability from abandoning real estate is discharged in a Chapter 7 bankruptcy.
The conclusion of the article, advises avoiding filing for bankruptcy because it’s tougher in some cases to protect assets such as your primary residence from your creditors in bankruptcy. This statement is inaccurate in New York State. Two years ago, the New York State Legislature increased the homestead exemption to $50,000, so a couple that is married and jointly files for Chapter 7 bankruptcy can protect a home with up to $100,000 in equity. In this market of falling home prices, many clients can file for Chapter 7 bankruptcy and protect their house. If a couple has more than $100,000 in home equity, they can protect their home by filing for Chapter 13 bankruptcy and pay off their creditors over a three to five year period.
Bankruptcy isn’t for everyone-but you do your readers a disservice by ignoring the benefits a “fresh start” via a discharge of debts in bankruptcy which can provide relief to people who are caught up in our country’s growing storm of foreclosures.
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