Carol Bess | Winter Park Divorce & Family Law Lawyer

In Re Cooper Practice Area: Chapter 13 Bankruptcy Outcome: Crammed down mortgage ballooned at end of plan Description: The Court allowed the reduction of the mortgage on an investment property located in Fort Lauderdale, FL, to fair market value in the current environment, and allowed the mortgage to be paid in a balloon payment at the end of a five year bankruptcy plan, despite bank protest. The judgment, issued late last year, also specifically denied a Motion to Reconsider which had been filed by BankUnited, the mortgage holder. This landmark ruling is the first to allow for a balloon payment on a mortgage at the end of a five-year bankruptcy term. "The Cooper Case demonstrates that we are able to re-value non-homestead property,” said litigator Carole S. Bess. “It’s ironic that we are not able to change first mortgages for people who live in their homes. But we can file a motion to value investment properties based on what they are worth, rather than what is owed on them.” “In this case, the mortgage on the house was $309,0171.41, and we were able to value it at $120,000. The issue that made this case unusual is rather than having to redo the mortgage and pay it in equal payments over five years, we were able to structure adequate protection payments. Rather than dividing the new mortgage amount in equal payments over 60 months, we were allowed to devise lower payments over five years with a balloon payment at the end. This provides the property owners with the opportunity to refinance when they are able, at the end of their bankruptcy period,” said Ms. Bess. “Even though this particular mortgage was substantially reduced, people who are in bankruptcy are not typically able to pay the full amount of a mortgage in equal payments over only five years. Allowing the person to balloon the mortgage and refinance during the life of the bankruptcy plan gives them the opportunity to find other financing when the market gets a little better. You can do this in a Chapter 13 bankruptcy,” she added. With predictions that Central Florida market will continue to lose another 25% of housing values over the next few years, this approach is very helpful for people who have second houses that are upside down in the market, or have a relative, perhaps their child, living in that second home, and are experiencing financial distress. Florida residents need to know that there are many opportunities during bankruptcies to slow down foreclosures, adjust mortgages, and keep people from losing their homes and investment properties in these tough times.