Strategic Debt Restructuring
By: Jim Macklin
Secure Document Research
How many property owners in this country experienced the flush of “money for nothin’ and kicks for free” during the build-up to 2008? Champagne, boats, leisurely weekends at the lake all came part & parcel to those who were able and willing to leverage themselves at the urging of their local and national banks.
Obviously, those days were hazy and fast-paced for those caught up in the whirlwind of easy money provided by Wall St. and the MBS profits. I can still see the faces and attitudes of the mortgage brokers, loan officers and title company agents who were suddenly the darlings of the communities across the U.S.
Life ain’t pretty for most of those who drank the Kool-Aid, and even more wrenching is the vast number of middle-class people who thought real estate transactions would do nothing but increase in value for their retirement years. Second homes, rental properties, condos and vacation homes are all now on the chopping block in order to stave off impending financial catastrophy, even for the wealthiest of Americans. I live near and visit one of the greatest vacation areas in the west, Lake Tahoe, and have seen the area’s property listings compromised mostly of second and vacation homes for Silicon Valley’s upper middle-class dot commers.
However, for those who have managed to hold onto the properties while paying into loans that are now grossly under-valued, or more properly put, more accurately valued, the term “underwater” is a sore talking point at parties. Welcome to reality.
One of the best-kept secrets that your lending institution or servicer does not ever want to tell you about is the strategic Bankruptcy under Chapter 11 of the Code. Typically reserved for large Corporations (GMAC, Chrysler, etc..), there is a provision for individuals to take advantage of the benefits enjoyed by the biggest companies.
If you have more than one single family residence, such as a rental property, you may be eligible for the benefit of what is commonly called a “cram down” of un-secured debt. This mechanism allows for a restructuring of the unsecured portion (the underwater part that is the difference between what is owed and what the asset is worth). In many cases, especially for multiple property owners, apartment owners, etc, this strategy is a life saver.
As a paralegal and analytical research firm, we do not offer legal advice to anyone, but we can certainly refer anyone, for free, to competent practicing counsel who have experience on this arena. We have seen phenomenal results and everyday folks get their lives back on track, but with an appreciation for what they were able to preserve and a new perspective on how to better manage their credit and debt as a result of bankruptcy.
Stay tuned for a new video on debt and credit use and abuse and the smart ways to use credit and debt like the big boys do…you won’t want to miss this!