What happens if they file BK after I buy the FC? - Posted by js-Indianapolis
Posted by js-Indianapolis on July 03, 2003 at 01:36:33:
I’m working with another investor right now who has a foreclosure deal. The owners have previously filed Chapter 13, and it was dismissed 10 months ago. It might be worth noting, the BK court said, “It appears there were assets in this case.” So I figure they included the house, and the BK court knows what it’s worth. I’m wondering what would happen if they file again, 13 or 7, after they sell the house at a large discount. Also, how might you protect yourself? It’s not known if they are planning on it, just wondering what if they do.
The numbers are as follows:
$29K 1st foreclosing
$6,700 in arrears
no other liens known (yes, that is going to be confirmed)
The owner wants $10K to walk. So it’s looking like $45,700 purchase total right now. For simplicity, let’s assume net after sale is $75,700, to make it a nice round $30K profit. Again, this is all speculation, just go with this for now.
The real question is what happens if they decide to file again, somewhere down the road? The amount of knowledge I have is limited to, “That would be bad.”, and Ron Star’s Article. That states the BK court could reverse the sale up to 3 years after, and you’d become a creditor. OUCH! Can this possibly happen this way?
Now, to throw one more variable into the equation, this house is going to be sold to a new owner. Who might the BK court go after? The investor, or the new owner?
My thought on proceeding forward was to get a P & S signed, a deed if they can get it, give a shot at shortsale (why not?), but start into the close, ASAP. First step, title search, make sure it’s clear. If that’s clear, all I could see is getting a seller’s disclosure (ala Joe Kaiser) and adding a place for the seller to acknowledge “I will not file BK for 3 years affecting this transaction.” Maybe not worth much, besides getting the seller to promise they won’t. Maybe there’s an honest person left, that won’t go back on their word?
So sign it up, close it, sell it, and pray? That about cover it, or could you do more?