Posted by JohnBoy on January 29, 2001 at 23:15:25:
That could depend on what he elects to do in the BK plan regarding this property. Does he plan on reinstating the loan to keep the property? In a chapter 11 he can do this without having to come up with the $8k to reinstate. The BK court would work out a payment plan on the $8k and the seller would only need to start making the current payments on the loan. Once he files the chapter 11 it will stop the foreclosure for now until they submit a plan under the BK. The lender could motion the court for a lift of stay to continue with the foreclosure, but if the seller’s plans to keep the property then that would be submitted in the plan that needs to be submitted to the court for approval.
Since the seller is planning on filing a chapter 11 BK, then try to work out something with the lender before he files. See if you can get the seller to just deed the property over to you, subject to getting the lender to go along with you on just taking over the payments and adding the $8k on the back end of the loan. If the seller files chapter 11 this will end up stopping the foreclosure because the BK court will issue an automatic stay against all the seller’s creditors, including the lender on this property. This would only end up dragging out the process for the lender to get the property back, which could take up to a year or two, depending on the complexity of the seller’s BK and the district the BK is filed in. Once the lender gets wind of this they may be more inclined to work out a deal with you just to keep the property from getting tied up in long drawn out BK proceeding. But you need to get this worked out BEFORE the seller files the BK. Also, whatever you do, DO NOT give the seller ANY MONEY towards this property. Make sure you give any money directly to the lender. DO NOT TRUST THE SELLER TO DO IT! If the seller is going to file BK, then he may just decide to keep your money and not pay the lender, leaving you with nothing in the end and he’ll just list you as a creditor to discharge the any money you would claim he owes you.
The best way to handle something like this is to just GET THE DEED and then work something out with the lender directly. If you get something worked out with the lender, THEN record the deed taking title to the property. If you can’t work something out with the lender then just tear up the deed!