CH 7 BK And Sub2:
Anyone out there know if it's possible to buy a property Sub2 after the owners recently had a CH7 discharge? Any risks involved in doing this as far as creditors coming after the property? I know that the answer to this can be quite complicated but any help would be appreciated.
As far as I understand, the BK trustee hold on to the property. Do I need to get the trustee's approval to purchase it? I am in NJ. Thanks.
M,
You wanted to know if you can buy a property sub2, from someone who has already filed, and had discharged a chapter 7 BK?
Right?
My question would be, did they include the home loans?
I'm no lawyer, so take this not as legal advice, certainly verify anything you read online with an attny.
Okay, CYA done, now........
If the seller filed a Chapter 7, this means they basically walked away from debts, not a re-structure.
If the house was included, the sellers are no longer personally liable for the debt.
If the house was affirmed, or left out of the bankruptcy, then the sellers are still personally liable for the debt.
When they include the home loan(s) in the BK, but continue to pay on them, the house remains fine.
The lenders usually leave things alone, because the note is performing.
The thing is, if the lender attempts to collect on the debt, it can only be enforced against the collateral, the house, not the sellers......when included and discharged in the BK.
Here's what I'm getting at.
I like this scenario myself.
Sellers file a BK, chapter 7, including their home loan(s).
They get discharged, and keep the house payments current.
They then sell to you, sub2, and you make the payments and own the house.
Remember, the loan was discharged in the sellers BK, so there is no personal liability, or garuntee with the loan, just collateral securing it.
The lenders recourse is still foreclosure, but only with the end result being getting the house back, not a judgement against the sellers/original barrowers, becase the BK let them off the hook.
A nice way to own a house if you ask me.
Owner Occupied loan rates/terms, and no liability to the names on the note.
I own a few like this where sellers either filed and got discharged BEFORE I purchased, and a few where sellers went thru BK AFTER I owned the houses.
Chapter 7 BK as I understand it is where all debts are let go, not restructured, which is Chapter 13 I think. This is where the BK trustee enters the picture as you were talking about, or prior to discharge in the Chptr 7.
Anyway, my take.....remember, I'm not a lawyer and this is not legal advice.
Take care,
Jim FL
[addsig]
I checked out the BK case and the list of creditors did NOT include the lender. So, I am guessing that the owners' house is as was (their lien) and was never discharged. Now the lender has started foreclosure proceedings and I just wanted to clear any possible risks of taking this property sub2.