If someone is in bankruptcy, and they are behind on their trustee payments, can they sell a house subject to, and what are the problems with dealing with sellers in bankruptcy?
Howdy Texasthumper:
Eventually they will get booted out of the chapter 13 case if they do not get caught up with the payments. They can not sell the property if it is included in the case unless you get court approval thru a motion and then a possible hearing. And then the sub2 comes up and the lender will probably not allow the transaction in the first place. Best to wait until the court dismisses the case or get the seller to file a motion to dismiss.
Thanks Ted, I have been working with a lady who is currently in bankruptcy. She wanted to sell me the house sub2, and I had called her bankruptcy attorney to ask about a motion to do that. He said since the property is homestead exempt, she can sell at any time without having to go through the hearing. He also said that if she does not pay the trustee his payments, it would be eventually dismissed, and at that time I would need to refinance. Would this be an opportunity for a short sale?
Howdy Texasthumper:
We have not discussed all the facts in the case. The home is protected from foreclosure by the Chapter 13 case with a plan to cure the default unless no default exists and she is just there for consumer debt with is not even advised. Never file unless you have some equity to protect. She can have the case dismissed at any time or yes she can sell exempt property. The lift stay would be removed and the lender free to foreclose unless the default is cured or a forbearance agreement is reached or a short sale is approved. All of this may be better resolved thru the court or prior to the sale with the lender agreeing beforehand. I would try to keep the court out of it. They will not approve anything the creditor does not agree too most of the time unless it is a matter of law. They can not for instance force the lender to take less for the property just because there is an offer on the table.
Thanks Ted, I appreciate the assistance with this situation. I have closed many Sub2 properties but this is the first bankruptcy I have had to deal with. Jim