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Most companies and individuals who are checking into different bankruptcy laws are seriously contemplating about the best move in order to protect their properties from foreclosure. Commercial and residential property foreclosure is on the rise these days even if their real estate values are underwater. Then why would someone want to still save properties from foreclosure which are almost worthless based on their market values?

Bankruptcy Laws Information would show that debtors are given more protection when they file for bankruptcy instead of giving in to foreclosure for underwater properties. In foreclosure, once a real property is redeemed by the creditors and sold at an auction the proceeds would be used to pay off debts. Unfortunately, the sales proceeds of foreclosed underwater properties are usually lower than the amount still owed by the debtor. And the deficient amount must still be paid by the debtor even after foreclosure has been done. In addition, debtors can still be held liable for some insurances and taxes even after foreclosure.

On the other hand, Chapter 11 Bankruptcy petitioners which are usually companies, find a better legal relief for their commercial properties subject for foreclosure by filing for reorganization bankruptcy. Companies can actually take advantage of a cram down in bankruptcy proceedings for underwater properties. This means that petitioners can request the courts and the creditors to change the payment terms of a mortgage loan with a high balance and to pay the amount instead that is equal to its low present market value. While this might entail hiring an appraiser, determining the right value of the property can save the company from high mortgage payments monthly. Such savings can be used to pay off other debts to make sure the repayment plan is completed.

However, for Chapter 13 Bankruptcy petitioners, whose homes are due for foreclosure, might be able to request for a cram down of real estate properties which are not their primary residences. Cram down applies if the individual debtor invested on real estate properties and one or some of them are due for foreclosure. They can request for a modification of payment terms as well on these investment properties. However, for a primary residential property which is underwater, individual petitioners can still check with their bankruptcy lawyers on stripping the lien off the second or third mortgage. Some petitioners do not only avoid the high payments on these debts but may actually avoid paying them completely.