Subject to deal now seller files Bankruptcy? - Posted by BadDeal

import · October 21, 2003, 12:02pm

Posted by Dimpil on October 21, 2003 at 18:58:11:

Basicly it’s up to the BK Judge. He has absolute power. He can deem the sale invalid or he may not. It all depends on the circumstances. IF he feels there was enough equity in the property to pay off creditors he just may say, no deal, if not then he just may let it go.

import · October 21, 2003, 12:02pm

Posted by BadDeal on October 21, 2003 at 12:02:22:

Does anyone know how to handle this?

Let’s say I purchase a property subject to
existing financing. Two months later
the seller decides to file bankruptcy.

Will I lose out on this deal? What happens
to the new tenant/buyer that is living in the property?

Thanks for any help.

Jeffrey

import · October 21, 2003, 1:00pm

Re: Subject to deal now seller files Bankruptcy? - Posted by Randy (SD)

Posted by Randy (SD) on October 21, 2003 at 13:00:08:

If the seller files bankruptcy and includes the subject property in the bankruptcy you have a problem! You most likely will lose the deal, and could be subject to legal action against you from your T/B. If you?re in this situation, seek legal advice now. Your options may be limited to securing new financing and buying out the seller.

import · October 21, 2003, 2:14pm

Re: Subject to deal now seller files Bankruptcy? - Posted by JIm N

Posted by JIm N on October 21, 2003 at 14:14:24:

Incorrect. You have taken deed to this house and the Seller may not include house in Bankruptcy. Contact the attorney and show him this fact and the fact that payments are being made. House will be removed from these proceedings. End of Story.

JN

import · October 21, 2003, 6:28pm

One other thing - Posted by Russ Sims

Posted by Russ Sims on October 21, 2003 at 18:28:08:

If the soon to be bankrupt seller had a lot of equity (probably not) and sells to you before filing BK, the BK judge could rule that as a fraudulent conveyance. BK courts take a dim view to selling off assets just prior to filing BK. I guess the idea is that someone could sell a home to a friend or family member, file BK, then have the home deeded back to them.

import · October 21, 2003, 6:22pm

Re: Subject to deal now seller files Bankruptcy? - Posted by js-Indianapolis

Posted by js-Indianapolis on October 21, 2003 at 18:22:46:

INCORRECT again. I know an investor who had a seller file bk after he took a house sub to. Now, this was a sub to where the seller paid him to get out of the house. The bk court had requested that he give the $7K back to the seller. At the time I last talked to him about it, he didn’t know how it would all play out in court.

I’ll see if I can find out what the final outcome was. I also do not recall if the bk court asked to reverse the sale. They did, however throw a monkey wrench into a perfectly executed deal.

Just throwing a deed up, and saying, “mine mine mine” ain’t gonna do it. This is federal court remember. They can trump just about anything. THAT would be “end of story”.