Yes, you can use Chapter 13 to stop a foreclosure on a rental property, or on any real estate that you own.  The automatic stay that goes into place the second we file your case and a case number is assigned will put a halt to any pending foreclosure.

Chapter 13 cases involving rental properties do create additional challenges to you and to your Chapter 13 lawyer.  The Chapter 13 trustee assigned to your case will usually take the position that the personal financial reorganization contemplated by Chapter 13 of the Bankruptcy Code is designed to help you keep all reasonable and necessary property.  Rental property, by its nature, involves a degree of speculation.  Many things can happen when you are in the business of renting property – your tenant may leave, you may be called upon to pay for an expensive repair, the rental market may change forcing rental rates down.

Many Chapter 13 trustees take the position that if you want to reorganize under Chapter 13 and keep your rental property, your plan needs to provide for 100% (or close to 100%) payments to your other creditors.  As a Chapter 13 trustee recently explained to one of our lawyers “we are not going to ask your client’s other creditors to subsidize his real estate investments.”

As a rule, therefore, you can end up paying a higher plan payment and a larger percentage dividend to your unsecured creditors if you include a rental property and seek to keep it.  That being said, Clark & Washington has filed dozens of cases for clients with rental property and we have successfully represented these clients to a confirmation.

Of course if you are considering filing Chapter 13 and you own a rental property, please make that fact known to your Clark & Washington lawyer so that all of your options can be discussed.