January 31, 2012
By: Brenna Lemieux
Enrico Wallenda, once part of the celebrated circus act known as the "Flying Wallendas," has filed for Chapter 13 bankruptcy protection, reports InsideRealEstate.com. His debt woes seem to be primarily linked to real estate investments: in addition to his own home, he apparently owns two rental properties that have proven too expensive to handle.
Once known for performing daring feats on the high wire with Ringling Brothers and Barnum & Bailey circus, Wallenda now finds himself living on a narrow margin of a different kind. During the past three years, it seems that Wallenda has suffered from severely limited income: his bankruptcy forms note that he earned $1,800 in 2009; $8,000 in 2010; and only $10,000 last year.
In his Chapter 13 bankruptcy documents, he reportedly listed debts totaling $419,231 and assets of only $202,642. Despite his limited earnings, it appears as if Wallenda has continued to live the lifestyle of a circus star: while his monthly income from rental properties at present comes to $3,250, he spends $7,695 per month, of which only just over $2,000 is spent on mortgage payments.
It is possible that Wallenda will seek to refinance his rental properties in bankruptcy court, which has the authority to offer modifications on non-primary mortgage loans. Wallenda may seek to "cram down" his loans in a process formally known as Chapter 13 bifurcation, which involves separating the amount of a mortgage loan that is secured by a house’s value from the part that is unsecured.
Bifurcations are particularly useful when a home’s value has declined since its purchase, which Wallenda’s likely have. Unfortunately, Chapter 13 bankruptcy petitioners looking to modify the terms of their primary mortgages are not able to take advantage of bifurcation.
This restriction was put in place decades ago, as part of a number of measures intended to increase home ownership in the U.S. by keeping the interest rates on mortgage loans relatively low: banks were motivated to lend more freely to borrowers when they knew those loans could not be discharged or modified in bankruptcy court.
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