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Craig D. Robins, Esq. New York Bankruptcy Attorney, Longisland bankruptcy attorney

“ Craig D. Robins, Esq., has been a practicing Long Island bankruptcy attorney for over twenty-four years ”

Craig D. Robins, Esq.

Many Owners of Million Dollar Homes Filing for Bankruptcy

Posted on Thursday (September 10, 2009) at 8:27 pm to Bankruptcy and Society
Chapter 11 Bankruptcy
Long Island Economy

Many Owners of Million Dollar Homes on Long Island are Filing for BankruptcyWritten by Craig D. Robins, Esq.
The precipitous drop in real estate values during the past two years is forcing many wealthy homeowners to consider bankruptcy as an option and Long Island is no exception.
Here’s why:  many well-to-do individuals invested heavily in one parcel of real estate — their home — during the go-go real estate boom, thinking that it was a fantastic investment.  After all, who could complain about an investment that increased 10% to 20% in value for a number of years?
However, as we all know, real estate values have plummeted.  To make matters worse, many of these high-income homeowners leveraged their real estate purchase.  They bought a million dollar home and financed it with a million dollar mortgage.  Unlike an investment in stock, which, in a worse-case scenario, can become worthless, a leveraged investment in real estate can result in an extreme amount of additional liability.
Thus, if the value of the home is under water and worth less much less than the amount due on the mortgage, the homeowner can now be liable to the mortgage company for hundreds of thousands of dollars.  In addition, the homeowner must also pay for property taxes, insurance and maintenance.
With many highly-paid executives being laid off, there are a lot of million dollar homeowners who can’t afford to make their mortgage payments.  According to data from the National Bankruptcy Research Center, personal Chapter 11 filings, which is the type of bankruptcy a wealthy individual would file, have jumped 73 percent over last year.
In general, if secured debt is more than $1,010,650, then a homeowner is not eligible for Chapter 13 bankruptcy, and instead, must file for Chapter 11 bankruptcy, which is also the type that businesses ordinarily file.  Individuals who have earned substantial income in the six-month period before seeking bankruptcy relief are also precluded from filing for Chapter 7 bankruptcy because of the means test.
It is also interesting to note that listings of homes nationwide for sale worth $1 million or more increased 27.3 percent in July from October, according to Zillow.com, a Web site that tracks real estate transactions. Yet, the number of nationwide homes sold with a value between $1 million to $2 million fell 23 percent in July from a year earlier, according to the Chicago-based National Association of Realtors. Furthermore, there was a 21-month supply, up from 16 months last year.
In my Long Island bankruptcy practice, I frequently consult with individuals who previously earned substantial incomes, and homeowners who own expensive homes. 
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Craig D. Robins, Esq. is a Long Island bankruptcy lawyer, who is focused primarily on helping individuals and families, find solutions to their debt problems. Read more »


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Craig D. Robins, Esq.
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