Sample Chapter 11 Case for Homestead Property

Client has one house that is his homestead valued at $200,000.00. He is in his 5th year of a 30 year mortgage, 25 years remain or 300 months. The first mortgage is $220,000.00 and mortgage payment is $2,000.00 a month, he is 24 month behind with fees and cost totaling $55,000.00. Client has a second mortgage of $100,000.00. Client has $50,000.00 in medical bills and credit card debt.

Chapter 11 will allow him to pay his regular monthly payment of $2,000.00 a month and spread the $55,000.00 of arrearages over the next 25 years or 300 months at a rate of $185.00 approximately. The second mortgage can be stripped off the house because he owes more on the first than the value of the house. This debt then becomes unsecured with his $50,000.00 in medical and credit card debt. The $55,000.00 unsecured stripped 2nd  and the $50,000.00  in unsecured medical and credit card debt totaling 105,000.00 will get what the client can afford to pay over the next 5 years. What isn't paid will be discharged.

The outcome is different when you have rental properties or business property. The chapter 11 actually gives you more power to actually re-write your mortgages if it's not yourhomestead. Please see my other blogs re this.

Why File Chapter 11 for your Homestead instead of Chpater 13?