Posted by cheryl on June 14, 2005 at 13:24:47:
Thank you for responding to my post. Now, not only will I not get sick but I think I can even eat now…LOL
Bankruptcy - Posted by cheryl
Posted by cheryl on June 14, 2005 at 06:55:27:
I took a house subject to about three years ago. I recieved a call from the seller informing me that he is filing bankruptcy. He has not filed as of yet. I have the house on the market and and now a contract and the property is due to close in two weeks. I have totally renovated this property and have a good amount of equity. How will this effect me if he does file bankruptcy. Can that house which is not his homestead be excluded since it was deeded to me three years ago and I have been the one making payments. Any advice would be greatly appreciated
No Impact on you - Posted by JT-IN
Posted by JT-IN on June 14, 2005 at 12:50:22:
Cheryl:
The fact that it was 3 years since you bought this house, the Bk will have NO effect upon you. If your purchase was 3 months ago, different story.
You simply keep servicing the debt in tne mean time until you close. If you do receive anything from the Bk Trustee on this transaction, you simply send them notice, along with some form of proof that the conveyance was 3 years prior. The fact that the debt remains secured by that property in the form of a mtg, and that mtg is still in the prior owners name, is a non-starter for you or the Bk Trustee. Monitor your incoming mail for any notice, but you shouldn’t have any problems here that are relevant, due to the Bk…
Just the way that I view things…
JT-IN
Re: Bankruptcy - Posted by Chris
Posted by Chris on June 14, 2005 at 12:50:06:
Cheryl,
I don’t think you have anything to worry about regarding his bankruptcy, except maybe with the existing mortgage company. The house doesn’t belong to him, it belongs to you so it won’t be included in HIS bankruptcy. His filing bankruptcy will alert the mortgage company to the fact that he no longer owns the house against which the mortgage is secured and they will likely call the mortgage due. This requires you, as the existing owner of the property, to pay the mortgage in full. That shouldn’t be a problem since you’re closing on the house in 2 weeks.
I’ve never been in your situation, but from my experience, that is what I know to be true.
Re: No Impact on you - Posted by cheryl
Posted by cheryl on June 14, 2005 at 13:01:47:
Thank you. I’m not feeling so sick anymore. LOL
Re: Bankruptcy - Posted by cheryl
Posted by cheryl on June 14, 2005 at 13:00:10:
Thank you…I hope that is the case. Someone told me that the judge could possibly set the deed aside being there is alot of equity in the property. I’m not sure if they can do anything if we close and then he files? Thank you for your input. Wish me luck
Re: Bankruptcy - Posted by JT-IN
Posted by JT-IN on June 14, 2005 at 12:57:13:
Chris:
The debt upon the RE will be listed as part of the Bk filing. If he didn’t list it then the seller would continue to be responsible for any unpaid debt. To “not” list the debt would be a terrible move on the part of the seller, and I’m sure his Bk Atty will insist on listing the debt. In fact, for the Atty to suggest the Debtor to do otherwise, would rise to the level of malpractice…
Since the Seller does not now own the house, the house will NOT be listed as an asset in the BK filing. So just the debt is listed, not the asset. If the loan is current with the lender, they will cause no problem for the new owner who purchased it subject to. (99 out of 100 times, anyway). The only action that they could take would be to accelerate the loan, due to violating the DOS clause… which is totally a seperate function than the BK.
JT-IN
Look-Back Period in BK - Posted by JT-IN
Posted by JT-IN on June 14, 2005 at 13:11:40:
Cheryl:
The set aside that you refer to relates to the selling of an asset at less than FMV… an in doing so this disadvantages some of the creditors, in favor of the one who ended up with more equity… In this case it would be you, the buyer.
Usually this is done to transfer property and equity to someone in the sellers inner circle; (friend, relative, etc.), thereby not really giving up the equity at all. Again, this doesn’t sound as if it is your situation, since it sounds like yours was an arms length transaction.
However, even if a transfer is being looked at, usually the lookback period is 120 days from any property transfer to an arms length party, and up to 1 year if it is an inside transaction to a favored party. If the transaction is to be set aside, it is done so a fraudulent conveyance.
Your circumstances do not meet the above test of time or situation, so you should absolutely nothing to worry about. The only issue that could occur is when the lender is notified about the BK, they could then piece together that the Debtor is no longer the owner of the property, and invove the DOS clause. Their remedy is to accelerate the debt and foreclose. This would not be part of the Bk filing proceedings, and the Bk Trustee could care less about a DOS clause.
JT-IN