If a pre-foreclosurer goes bankruptcy??

Say you get a signed Sale Contract with a person in Notice of Default… but then they file bankruptcy before escrow closes with the person you’ve assigned the contract to… now what? Is the whole deal simply a wash or does the assigned Buyer end up losing money?

Howdy Enricosuave:

There is not one simple answer to your question. The court will allow the sale if it is the interest of the BK 's estate. If the lender objects to the sale and there is no equity then the court may allow the lender to foreclose on the property. It also depends which chapter they file. A 13 allows the debtor to keep the house and make payments on the past due payments. Here again if there is no equity the lender may object to the plan and they could win the right to foreclose.

Your buyer may not want to wait all this out and would be entitled to a refund of their earnest money and probably the assignment fee if they paid that as well.

This is one reason I would not pay the assignment fee until the deal closes. If they did pay the assignment fee they could very well lose that if they chose not to buy because of the sellers BK filing.

Hope this helps some.

If the contract preceded the bk, I would think the contract is enforceable. I would think and again I think that the debtor would be accountable for any deposits. Any assets liquidated 60 days before the filing are subject to the bk.

My thought is let’s say the debtor receives 5k in equity or will receive 5k in equity. Then that becomes subject to the BK TRUST.

Anyone concur or disagree?