Posted by JohnBoy on February 03, 2002 at 01:58:35:
If the seller files BK before placing anyone into the property then the seller is going to need permission from the BK court to allow them to L/O the property before you can just enter into a L/O agreement with someone.
If the seller defaults and the lender gets a lift of stay, then yes, they can foreclose!
Assuming the L/O with the T/B was approved by the BK court and later the lender ends up foreclosing because of default, then the T/B will need to come up with financing to pay the lender off before the foreclosure goes through. Otherwise they end up losing the property.
The back payments that were put on a separate payment plan in the BK will have to be paid in full to get clear title from the lender. The lender is a secured creditor and they are entitled to get paid every dime owed when the debtor elects to keep the asset.
You “might” get the lender to accept all the back payments to reinstate the loan and stop the foreclosure…but if the debtor defaults on their chapter 13 then in all likely hood they will convert to a chapter 7 and have all debts discharged by the BK court, including their mortgage owed on the property. Once that happens the lender has no one that is liable on their loan. So they would probably continue with the foreclosure to get the property back so they can liquidate it to clear this off their books. You could “try” to get the lender to leave the loan in place by agreeing to bring the loan current, but that isn’t something I would bank on! Depending on the T/B the lender may be willing to just finance them by giving them a new loan to pay off the old loan just so they can clear this up in a hurry and save themselves from taking a loss on the old loan. Of course, that will depend on the credit worthiness of the T/B at the time. Or you as the middle person in the deal can just refinance the property yourself to protect your T/Ber’s interest in the property. Since you would be in the middle then you run the risk of the T/Ber suing you for their losses involved with the property.