Are my investment properties at risk in my foreclosure?

Do you lose investment properties if you foreclose? This is a common question, but there is no one definite answer. Whether or not you will lose investment properties can depend on whether they are serving as collateral for your existing loan. If the houses are listed as collateral, or as a guarantee for the loan that you have on the property being foreclosed on, you may lose those investment properties. If they are not listed as collateral, then the bank will not be able to foreclose on them. 

The best option for most people who own investment properties that may be foreclosed on is to file a chapter 13 bankruptcy. Chapter 13 allows you to restructure the debts that you have instead of to liquidate them. There is no requirement that assets be turned over for sale, since the bankruptcy is not a liquidation bankruptcy. Instead:

• You list all creditors 
• You create a repayment plan in which you will pay a set monthly amount to all of your eligible debts. The amount that you will be required to pay each month on this monthly plan is set based on your income, and the remaining outstanding balance at the end of the plan- which normally lasts anywhere from three years to five years- is forgiven. 

When you have investment properties and file a chapter 13, generally mortgage debt is not included in the repayment plan and must be paid in full. However, there are times when it is possible to do something called a "cram down" and to alter the actual principle balance you owe on the investment property's mortgage (usually, but not always, this works best for a second mortgage).  The remaining balance after the cram down would then become part of your other debts included in the repayment plan.

To get help understanding the implication of foreclosure on your investment properties, or for assistance in learning about a bankruptcy cram down, you should strongly consider speaking with a lawyer.