How Does Bankruptcy Affect Multiple Or Different Types Of Investment Properties?

Having multiple investment properties, or even a single high-value investment property, can affect which chapter of bankruptcy you elect to file under. The first key is determining how these properties are titled and held. Many people who venture into real estate as investment properties will create separate legal entities, sometimes a new entity for each property, such as a limited liability company (LLC) or a real estate holding company. Hopefully good legal advice was received at the time of creating these entities. Other people simply purchase investment properties under their own names. How they are held will often determine which entity or individual needs to file for bankruptcy.

Total debt level will be a factor as well. As of April 1, 2025, the debt limits for filing a Chapter 13 bankruptcy are $1,580,125 in secured debt and $526,700 in unsecured debt. If an individuals debts total more in either category, then Chapter 13 is unavailable and they must look at filing and individual Chapter 11 case, assuming the intent is to try and keep the properties. Chapter 11 has a relatively new type, called a Subchapter V, that is a streamlined, more efficient form of Chapter 11. The debt limit for Subchapter V is currently $3,024,725 in total debt. Subchapter V is often preferable to a traditional Chapter 11, as they are faster and less costly. Chapter 7 is always an option is they are looking to surrender the properties or have other debts to address and the properties can survive a Chapter 7 bankruptcy without being liquidated or foreclosed upon.

Net equity in these properties will also be a determinative factor in most cases. If there is equity to protect in some or all of the properties, then some form of a reorganization will likely be required in order to keep those properties.

Having multiple investment properties adds an entirely new level of complexity to a bankruptcy filing and it is almost essential that you retain and experienced bankruptcy attorney to review your situation and guide you into the correct chapter with the correct entity filing. These cases require a lot of analysis and strategic legal considerations that most people will not be familiar with.

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