Buying Property Out Of A Bankruptcy - Posted by Vic

Posted by David Krulac on March 09, 2001 at 16:02:48:

the time to fill out the contract/offer is the same, its just that the wait may be a little longer.

Buying Property Out Of A Bankruptcy - Posted by Vic

Posted by Vic on March 08, 2001 at 17:25:19:

Hi everybody,

Do any of you all have any experience with buying property out of a bankruptcy.

I got a call today from a lady who wants to sell me her house, but she just recently filed for Chapter 13 bankruptcy.

My original thought was to see if I could buy this property using either a land contract or L/O.

There’s about 20K of equity in it. As of now she is only behind 2 pmts. But because she filed the B/K, the mtg co. is starting legal action to foreclose.

I just got off the phone with her attorney. He said that in order for me to buy the property, the bankruptcy court would have to agree to the deal. I asked the attorney if he though that they would agree to a land contact in which I would catch up the back pmts & make the loan current or perhaps do a L/O.

He said that I’d have to be able to show a benefit to the buyer in order to get the court’s approval. If I did a land contract for the current payoff amount or if I was to do a L/O, chances are there wouldn’t be any benefit to her. So now I’m thinking that if I wanted to buy the property I’d have to pay FMV for it or something close plus I’d have to put a new loan on it.

Am I correct in this assumption or is there some other way to proceed on something like this?

Thanks,
Vic

Re: Buying Property Out Of A Bankruptcy - Posted by JohnBoy

Posted by JohnBoy on March 08, 2001 at 22:35:20:

My understanding from what I’ve been told is that the BK Court would not allow a contract sale. However, they would allow a lease with an option to buy, subject to the approval of the BK Court. My guess on this is that once you first get pre-approval from the BK Court, the Court would then notify all creditors of the deal and give them a certain number of days to object. If anyone objects a hearing would be scheduled. After that, the Judge makes his ruling and either approves of the deal or denies it. If no one objects the Judge would most likely approve the deal once the time for any objections was up. This whole process could take several months to get final approval through the Court once the BK has been filed.

The Bankruptcy Judge has some discretion… - Posted by David Krulac

Posted by David Krulac on March 08, 2001 at 18:24:09:

but besides looking out for the bankruptee, they also look out for creditors. If she has 20k in equity, she must also have more than 20k in other debts, both secured and unsecured. All of the creditors can get a peice of the action. A deal is possible, but often times it takes time for the court to decide on the deal. Good Luck.

Re: Buying Property Out Of A Bankruptcy - Posted by Vic

Posted by Vic on March 09, 2001 at 13:02:53:

Hey JohnBoy how’s it going?

The process as you described it is pretty much in line with the way the lawyer described it, although you went into more detail than he did. LOL

Anyway, I wonder what the chances are that all the creditors would go along with it, being that there is some equity there. If they’re smart though, they’ll realize that once they pay all the foreclosure costs, commissions, etc there won’t be much left.

What you think?

Vic

P.S. - Posted by Vic

Posted by Vic on March 09, 2001 at 13:04:11:

In your opinion, would the fact that the lender is starting foreclosure have any effect on things?

Thanks,
Vic

Re: The Bankruptcy Judge has some discretion… - Posted by Vic

Posted by Vic on March 09, 2001 at 12:59:14:

David,

Do you think it’s worth pusuing? or is it too time intensive?

Thanks,
Vic

Re: Buying Property Out Of A Bankruptcy - Posted by JohnBoy

Posted by JohnBoy on March 09, 2001 at 13:18:53:

If this is a personal residence then the seller would probably be entitled to an exemption amount on the home. I think it’s around $15k, which creditors wouldn’t be able to touch. Double check that with their attorney. If he’s a BK attorney then he SHOULD know this.

Aside from all that, it’s probably unlikely other creditors will object to it. Even if they do, the Judge has the final word and from what I understand, Judges pretty much lean in favor of the homeowners. The biggest problem with this is the time process involved to get everything approved through the court. That would at least allow you time to market the property and find a tenant/buyer to put into it. Just make sure everything in writing is “subject to the Federal Bankruptcy Court’s approval” to avoid any potential lawsuits from a future buyer should something prevent the court from approving the deal!

A Foreclsoure and a Bankruptcy together… - Posted by David Krulac

Posted by David Krulac on March 09, 2001 at 16:06:01:

usually just means that the foreclosure is slowed down, but it will almost always still happen. Most of the time there is not much equity either. If the court decides that there is a lot of equity that should not be lost, that input will be considered.