Posted by JohnBoy on February 04, 2001 at 16:44:06:
Once the owner is in bankruptcy then any sale of assets must be first approved by the US Bankruptcy Court. So to answer your question, yes, the owner can sell the homes, BUT, he must first get permission from the BK Court to do so. Depending on what district the BK is filed in, it could take as little as 30 days to get approval and as long as 60 - 90 days depending where the BK case is being heard. Most likely the BK Court will set a time limit to give all the debtors a chance to object to the sale. If no one objects then the court will approve of the sale. If one of the debtors creditors does object then a hearing on the matter will be scheduled. So depending on whether or not anyone objects to the sale it could drag out for another few months to get approval by the court. The more equity involved with the property the more likely of other creditors objecting to the sale.
If you’re looking for a deal here that would net you a sizable amount of equity then my guess is it would be unlikely to get approval from the court. The BK court will want to recoupe as much of the equity as possible to pay off creditors of the debtor. Of course, allowing for the cost of selling where a real estate commission and holding costs would be involved could allow for that amount to be able to sell the property under market value. The debtors BK attorney would need to properly present this to the Judge to get court approval to allow the sale.
Also note that in a BK case, the court will not allow a sale that involves any seller financing. It will have to be a cash sale. Although they will allow the debtor to lease a property giving the tenant an “option” to buy at a price approved by the BK court.
As far as how long a BK case can take will depend on the type of BK that was filed. Typically a chapter 7 will take about 90 days to resolve. A chapter 13 (personal debt reorganization) or a chapter 11 (business reorganization) can take up to a year to just get into approving a plan to pay back creditors. The plan can be set up for 3 or 5 years easily stretching the case out for a total of 6 - 7 years.
What you would need to do is find out what type of BK the owner has filed. If it was a 13 or an 11, has a plan been submitted and approved by the court yet? Then whether or not the plan calls for any of the real estate to be sold or kept and reinstated. Then whether or not the real estate can be sold now or not and get court approval for the sale and dollar amount being offered.
The property could also end up getting scheduled for a BK sale where the property will be auctioned off or the owner in BK may be planning to just let the property go back to the creditors that hold a lien against it if their isn’t enough equity in the property for the court to go after and apply that towards paying down the debtors creditors.
Bottom line is, find the owner and find out what is going on with these properties. Then get with the owners BK attorney and see what you can do about buying these and have him motion the court for approval of the sale…assuming you can get the owner to agree on selling these to you!
Does this sound like FUN or what??? LOL