Re: Bankruptcy! Does it effect a current mortgage? - Posted by Bill Gatten
Posted by Bill Gatten on June 14, 2000 at 15:25:20:
You’re probably right. If the guy is IN bankruptcy ow, and is dumb enough to declare the property, knowing that you’re standing by to take it off his hands, I’d be cautious. However, as J. Piper apparently mentioned (quoting Stacy), look for those who are trying to avoid filing, and or those who are looking for a way to deal with the property BEFORE filing.
If the property has been sold to you prior to BK (by any means), the actual debt is no longer the debtor’s (as far as the BK filing is concerned) and the debtor would have no reason to declare it as a debt, asset or liability. If you are the one who owns (by any means) it and he does so anyway, it is most unlikely that a bank would do anything about it if they are receiving their payments (however, do remember that it is I who screams loudest about how lenders DO use the DOS as a reason foreclose if they ever want to).
It’s just a risk that I have no problem in taking. I’m not worried about the BK court coming after the property–at all…but you’re right…theoretically the bank could. Though they’d probably do so under the rights implied in their Due on Sale Clause. And, if the property has not been sold, but only placed into a land trust and leased out with 100% of all payments being made by the tenant…and not made a part of the BK: that then waters down their Want-To pretty good. And, though I’m not an authority (Bronchik is the attorney), I’d still say the risk in what you’re alluding to is minimal at best.
Though I do think in a case like this it would be prudent to assure that the owner has received, completed and returned the necessary “permission” froms from the lender for placing the property into the trust. Which trust, of course, must be an inter vivos, revocable borrower directed trust ?in the the borrower is and will remain “a” beneficiary. I.e., he assigns most of the beneficiary interest to you, with an agreement to forfeit the rest at termination.