How does Ch.7 bankrupt. affect REI?

[i]I have this on the beginners post but hope anyone with dealing with people in bankruptcy or foreclosure could help with this.

House is 2,000 sf on a 20,000 st lot, built 1963. I have an agent running comps - last sold in neighborhood was 3/31/05 build 1997 at 2,276 sq ft for $475K.[/i] Thanks for any advice!

Alright, I am going to see this SFH tomorrow afternoon at 4 PM. I found out through talking with owner the following:

she is in Chapter 7 bankruptcy
The hearing is Oct. 17 and discharge is Nov. 17
She is (almost) 1 month late on her payment - it’s more than 5 days overdue to lender for September and will likely be late this month.
She has 2 mortgages totally approx 277K (1st is 241K and second is 36K).
She has a prepayment penality on one loan which is up November 23rd - that’s one reason she doesn’t want to sell until December and she said the other is because where she is looking to buy - about 45 minutes north of where she is now, over the MD/PA line “the houses sell within 48 hours” and she doesn’t want to do an HOC contingency.

I asked if her loan was assumable or a VA loan - it’s not a VA and she is looking through her papers to determine if it’s assumable or not and will let me know. Probably not, I think.

I know nothing of bankruptcy, etc. From talking with her today I am thinking that in her mind, she is going to let the payments go because she knows a NOD won’t be filed until 90 days deliquency, which puts her at November 29. I think she is looking to actually sell this between November 23rd, when the prepay penality is up and November 29!

She also said she is starting a new job next week, gave up the daycare she was doing.

My one question - just random - is how can someone in bankruptcy buy a house???

Now, with this new info, if anyone would like. . .please advise how I may be able to structure this for a buy and resell, or an assignment.

Howdy Immy:

There are several ways to buy a house in bankruptcy:

The court orders that you get court approval to incur debt. This makes it harder to buy a house and get a loan without court approval. There are loan companies that will loan 1 day out but that too is not easy and the rates are higher. I believe you must not be more than 4 months past due. It is confusing as this may be for a refinance? Anyway they may be able to obtain a new loan with court approval or 1 day out without approval.

They can also do a lease purchase. This can be done without court approval but is not suggested. Also the court could easily approve the deal is they are giving up the property they are currently in and using exempt property for the down payment. Non exempt property is supposed to be turned over to the trustee.

They can also own or control a corporation, LLC, Partnership that can purchase a house and lease to them.

If they house is a homestead or otherwise exempt from a forced sale by the trustee then after Nov 17 I believe the lender can start the foreclosure perhaps even the day after the hearing. There is a standing order or law that the lift stay will expire a certain time after a case has been confirmed and the exempt assets are up for grabs. I am uncertain here of the time line and I have had it happen to me personally.

thanks for your reply!
Does the fact that she’s in Chapter 7 impact my ability to buy this house?

She can still sell the house to you however she may have to have a judge sign a court order to approve the sale of the house. Often times in a bankruptcy the seller can’t sell anything without it going thru the trustee and a judge. If you have done some preliminary title work it will be disclosed on schedule B.
I had one about 3 months ago that was not known about until the title work came and it took us another 3 weeks to get the signature from the court. Good Luck