Posted by Stew(NE) on January 12, 2004 at 11:27:48:
I posted this earlier:
Hi I just closed on a property that was in Chap 13 and flipped it. My first contact with the person was in August, so don’t expect this to happen fast. Here are the steps I had to complete. Chap 13 is federal law, so I am guessing that all states are the same (I could be entirely wrong). I did pay an attorney ($180 per hour) to get me thru this. I don’t think SUbject-to will work, you (or in my case my buyer) will have to buy the house.
Step 1: Strike the deal (This assumes there is some equity) with the homeowner, but put a clause in the addendum, “Subject to the successful negotiations of the payoff with the lender not to exceed agreed purchase price”
Step 2: After you have the contract, you are the seller needs to contact her attorney handling the Chap 13 and tell him (or her) that you need to get the House release from the Chap 13 Bankruptcy so you can purchase it. They will either argue that your price is too low and it has to be FMV (and you have to support your offer, Furnace repairs, roof leaking, give them something)
Step 3: In my state, the homeowner has an exemption (homestead exemption) of $12,500 that the other creditors can’t get to. If you are promising the seller money, you need to find this out. When you go meet the seller ask her for all the paperwork that he or she has. You may get the list of creditors.
Step 4: The bankruptcy attorney has to file a motion to the court to release the house from bankruptcy so that it can be sold. The “bar date” is 20 days here. So the creditors are notified that the house is going to be sold and they have that long to file an objections. I wouldn’t sweat the creditors, most of them don’t want to bother with it for the little money involved.
Step 5: After the “bar date” is passed the attorney then files a motion to the Bankruptcy Trustee to release the house. and the Court will issue a judgement releasing the house. Then you can buy the house. Whew. This is the condensed version. The one that I just did, went down to the wire. At 12:38 yesterday the court issue the judgement, the foreclosure auction was at 2pm (which I had to beat). Once I had the judgement and my buyer had clout at the bank, we were able to postpone the sale for 24 hours to fund it. SO it can be done, but if you are new don’t be afraid to asked and read and asked and read along the way.