Posted by Legalwiz on May 21, 1999 at 10:23:19:
If the seller transferred his interest to you, it is not part of his bankruptcy estate (unless the creditors claimed it was a fraudulent conveyance, which is not likely if he has no equity).
You will need to go to his atty and request that he drop the loan from his bankruptcy petition.
BK’s and land trusts - Posted by rayrick
Posted by rayrick on May 20, 1999 at 17:49:23:
Hi all,
My first deal has taken a rather distressing turn today. The sellers called to inform me that they received some sort of large bill (in the thousands) that they had forgotten about-overlooked-god-knows-what and may be forced to declare bankruptcy. I have a signed agreement with them, but we have not yet closed. My intent was to buy their house “subject to” by placing it in a land trust.
My first thought was to see if there is some way to address these people’s financial troubles in the deal somehow. Thus far the woman has been reluctant to give me any details, but she may tomorrow after discussing it with her husband. If an extra $1000 or two would solve their problem, the deal may still be worth it.
What exactly would happen if these people put their property in a trust, assigned beneficial interest to me and then declared bankruptcy, in, say a month? Seems to me that at the very least the bank would find out about the deal, thereby rendering the whole land trust business kind of useless. I would have the deed though, so maybe what happens to them after that is irrelevant. I need to give Bronchick’s course a good study.
The possibility exists that this is all some sort of a ruse on their part to get out of the deal, but I kind of doubt it. they seemed too desperate to sell for that.
Any thoughts or advice would be most welcome. thanks all.
-Ray
Re: BK’s and land trusts - Posted by Bill Gatten
Posted by Bill Gatten on May 21, 1999 at 21:13:58:
The answer you got from Legalwiz is (as always) a correct one.
I might add however, that a co-beneficiary relationship is always best (i.e., two beneficiaries who are unrelated by marriage), in that it functionally renders the property non-partitionable by converting your ownership to personalty. It then becomes protected from judgement creditors (even BK courts and the IRS, except under the most dire and unusual of circumstances). Note, however, that if one (the seller in you case) had equity and were to create a land trust and a co-beneficiary relationship, in order to hide the property (assuming the statute of limitation hadn’t run it course), he would likely be found guilty of Conversion, which is Fraud: which is subject to big time penalties, including mandatory stripped dinnerwear.
In your scenario, the BK is not a reason not to proceed with your plans to take the property subject-to. Tax lines? Now that’s a different deal…
Bill