You can confirm if the stay has been lifted, or if the property has been removed from the BK, or the owner has defaulted on the 13. It’s all public record at the Federal Courthouse. If you can’t get there, you local BK attorney probably has on-line access and can tell you.
Who knows, or cares, why the owner moved out. Has nothing to do with the case.
Ch13 is a repayment plan, not a debt forgiveness like CH 7.
Just because the house is LISTED for sale doesn’t mean the property will actually GO to sale that day. Call the sheriff or trustee and ask it is in fact still scheduled. Or call the foreclosing attorney the same question.
Attorneys and/or trustees do NOT just release secured debt without the judge signing a motion to lift.
Can a person who is in Chapter 13 sell a property before it goes to a foreclosure auction?
The owner has agreed to sell for payoff plus $2000. The property is scheduled for a foreclosure sale in 1 week. This is the second time the bank has initiated a foreclosure sale. The first one was stopped when the owner filed Chapter 13.
Question - Can the owner sell the property?
If the seller signs over the deed and completes the sale, wouldn’t I have legal title to the property? Or, does the Trustee of the Chapt. 13 have to approve the sale?
What confuses me is Chapter 13’s are not recorded at the local courthouse (it’s a federal issue), so this wouldn’t come up on a title search. Seems to me I would be ok since the title insurance is supposed to take care of any discrepencies that are not found.
Please help FAST.
Different courthouse. Have your title company run a prelim title report. It will probably show that the lender asked for and received lift of the stay, so they could proceed with the foreclosure. This property would then not be part of the BK, and you could purchase it from the seller buy paying off the lender before the sale.
If it’s going to foreclosure sale, that means that the Ch 13 is either discharged, or the property was abandoned by the trustee, no? Or the lender got a relief from stay, same thing, the trustee did not want to pursue it.
If the trustee says he has nothing to do with it I would think the property has been abandoned.
“Abandoned” by the way does not mean vacant and moved out, but rather the trustee does not feel it is an asset that he can get anything out of.
It does happen by the way. A family member of mine recently declared bankruptcy, the trustee abandoned the property, the BK is discharged, and a few months later she’s under contract to sell and realize 60k.
I think most trustees are lazy when it comes to truly analyzing possible proceeds from properties that have significant mortgages on them.
If the Ch 13 is still active, and terms of the approved plan being met, it is highly unlikely that the RE would be going to foreclosure sale. For one, there would be a stay (or stop) to collection actions of all kind, including selling property at sheriff sale.
My guess is that the Debtor has failed to fulfill their promise to meet the Ch 13 plan, and the case has been dismissed. Therefore, all bets are off and any creditor can take whatever lawful action for collection, including seeking a sale at foreclosure.
You seem to have some misconceptions about the process of the property going thru the sale process… Such as, the Judge isn’t going to have to agree to the sale price of the foreclosure action. Either the court lifts the stay and allows it to go to sale, or they don’t; no in between… Another one is… about what a title company is going to check prior to conveyance… They are going to check Fed’l Bk filings and status of any case… so if the case is still active, then there is no deal here, w/o the Trustee’s signing of a Deed.
Again, my bet here is that the case is no longer active and the owner is free to sell to anyone they choose, as any terms negotiated… Just make sure that if that is you, that it is an insurable sale… Be certain to obtain title ins… Negotiate a sale with owner, have a title co rush the transaction, and if there is a problem, they will tell you that it is a NO-GO… Otherwise, do the deal.
if the bankruptcy is still active and hasnt been dismissed you would have to get trustee approval to have all of your bases covered.
you could take a risk and take on the house, buy it yourself and wait until the bankruptcy is either dismissed or closed, then sell it.
I sometimes would just call up the trustee to see if I could do it or not. Most of the time, they would say yes. And I would only do it on a property that was released from the stay.
But, you are giving the seller $2k so that throws a kink in the system. Technically, that money has to go the estate.
I believe you hit the nail on the head. The seller contacted his attorney, and was advised to let it go to auction. The other problem is the house is scheudled to be sold in just 3 days, so even if I could convince the seller to proceed, it’s unlikely at this stage we could complete the purchase before the sale date.
Looks like I’ll be attending that auction after all. . .
I see many instances of properties that come up for FC sale and get cancelled, only to come back up for sale at a later date. It would seem a bankruptcy only protects the property for a time. Either the banks are able to get the property released, or many people simply aren’t able to save the property through a reorg.
Any additional input would be appreciated.
Thanks
JT,
Thanks for your input.
I probably should have mentioned the owner has recently moved out, which I would assume means the stay is no longer in effect.
The paralegal wouldn’t talk specifics of the case with me for obvious reason, but she did tell me they’d need a bankrupcy judge’s blessing for the owner to sell to me. She seemed unaware the property was going to auction next week, and she suggested they might be able to convince the bank to delay the sale (to allow time to get a judge to approve) if there was a signed contract.
I also spoke to a very good real estate agent, who told me that even if the house goes to sale, the judge could revoke the sale if he feels the property was sold signficantly under value. If that happened, the successful bidder should get his/her deposit back.
If nothing else, I’ve learned a few new things about how this process works.
To sum the situation up, it seems the owner cannot sell the property. The bank can, but the sale would be subject to the bankrupcy judge’s ok.
Does that make sense?
Actually, I spoke with the Trustee after posting this.
He was very rude and short, but said he “had nothing to do it.” I called the attorney handling the case, and the paralegal said they would have to obtain a judge’s release before the property could be sold.
It’s unlikely that can be done before the sale.
If it goes to sale, the winning bid will still be subject to a judge allowing it. If the judge feels the price is too low, he can revoke the sale in which case the winning bidder would get their deposit back.
I think that you are getting someone’s version of “how they think it works”, but the problem is, they don’t know how it works…
The only way that the property will go to foreclosure sale is if the Creditor(s) seek a relief from the stay of collection, from the court, or if the Bk Trustee abandons the asset, which means the amount of secured debt is near, or greater than the value of the asset. in this case there is no surplus equity from which the Trustee can garner proceeds to pay themselves and other unsecured creditors. I have never heard of a situation that is anything other than “one way or the other”. It either goes to sale and sells to the highest bidder, either the secured creditor, or a 3rd party bidder. No shot for the Judge to go back on unfavorable results… in an arms length foreclosure auction. You/They could mixing information in a negotiated sale, from the Seller to you, and yes, the Judge can invalidate such a sale after the fact, for fraudulent conveyance… but confuse none of that with a foreclosure auction.
What you need is to have someone run the case in Pacer, who knows how to read the case and asset status, and let you know exactly what is happening in the Bk case, as well as to the property specifically. If you have no other contact to do so, email me the full name of the debtor, and the city and state of residence, and I will be able to check it for you in minutes…
The fact that the paralegal was surprised that the property was going to sale may be telling… Maybe it shoudln’t be, and if the case is still active, it shouldn’t be, barring the relief from stay or abandonment, mentioned above…
I retrieved some info today from an automated system by calling the Bankrupcy clerks office. The Chap 13 was filed around June/July of 2005. It also said a creditors meeting was held sometime afterwards, and payment plans (or words to that effect), were approved in February.
I also spoke directly to the attorney in charge of this today. All he would tell me what that he would contact the seller and advise him of what could be done to sell the property. Again, he wouldn’t give me specifics of the case, but I ask him, “generically speaking” if a person in Chapt 13 could sell a property. His answer was yes, but there was “time constraits” involved , and that’s all he could say to me.
I will be speaking with the seller tomorrow, and hopefully he will have spoken to his attorney by that time.
Somwhow the Lender has not gotten the word on the Bk status… This is unusual, but not unheard of… The sale would be invalid, not matter what it sells for… unless for some reason the homeowner did not include the mtg debt into the Ch 13 filing, but of course that wouldn’t make any sense… So there should be NO sale…
Back to your original premise… can you buy the house…? Yes, you simply need the Trustee to agree with the price, (ala FMV via an appraisal) that you have agreed to pay the seller. If it represents FMV, he should sign off… but there will be NO 2K going to the seller… Bk just won’t allow it to be so.
I think that your seller is highly misinformed here… over several issues… I can’t comment much beyond that without knowing many more specifics… Good luck on it…
JT:
This is the second time this property has come up for auction. I figured the first one was cancelled due to a stay, and therefore this one was going to happen.
As for your comments about the Trustee giving his approval, I believe you are mistaken here. I mentioned in an earlier thread I spoke directly to the Trustee and he said he had nothing to do with whether the property could be sold or not. That, he said, had to be addressed by the attorney in charge of the case.
And some of what is here is conflicting data… Your level of knowledge about Bk isn’t enough to follow what is happening in the case.
What is NOT normal is to have a Ch13 case, especially a new one, and have a property going to FC auction. This will only happen due to one of two reasons… either the owner did not include the debt of the property into the Ch 13 plan… or the plan has not been approved… or it could also have been converted from a 13 to a Ch 7, liquidation of assets, and the Trustee has abandoned the asset. Other than that, there would be NO sale.
So you must find out the details and be able to read the tea leaves, in order to tell you what you are dealing with. Problem being, you can ask a question about such technical matters of Bk, and not completely understand the answer… (not a knock on you, but it is the same if you ask a Physician about a medical condition, the answer many times goes over ones head). So you simply need answers, and interpretation of such answers, to know exactly what you are dealing with.
You relaying of what you think is happening, is much like someone presenting a half full box of puzzle parts, and lets see if we can assemble enough of it, to see what the picture looks like. Doesn’t usually end up well. So get all the facts, and the answer lies within.
This is the second time the property has come up for FC sale.
Now, the owner has recently moved from the property. Why would he do that if he’s in Chapt 13? Is it pausable that the bank has gotten the house released from the Chapt 13 in order to sell it? Could the owner have voluntarily given it up as part of the debt distribution processes with a Chapt 13? The loan is only 3 years old, so it may be the judge or trustee released it under the impression there was not any equity in it. The area it’s in has appreciated a lot over the last 3 years however.
Would that make sense?