Bankruptcy vs Foreclosure
I'm just a tad confused...
I understand if a person is heading toward foreclosure -file bankruptcy and it will stall the foreclosure
but what if one is in bankruptcy- then the owners cannot sell the home because the creditors will be putting claim to any equity??
So in that situation , wouldn't you want to be sure that the owners have not filed before you go offering to buy their house?
any further explanation is appreciated
LynLinz,
If a person is in Bankruptcy, you can contact the Bankruptcy Trustee assigned by the court to your seller.
Most Trustees are willing to discharge the property from the Bankruptcy. They try to help the Bankrupt Seller whenever possible.
Here again you would explain to the Trustee any repairs that need done, and overall condition of the property. The Trustee thinking conventionally, would also figure a real estate commission as part of the transaction, so include this in as a deduction in your figure.
Bottom line you can still make a deal on a property even if it is in Bankruptcy.
John $Cash$ Locke
Thanks John
If the debtor is still in a Ch.7 bankruptcy, you simply need the Trustee to sign a notice of abandonment. Then the equitable interest in the home reverts back to the borrower.
The borrower can then deed the property to the investor if a short-sale
can be worked out.
If the borrower is in a chapter 13 BK, you will need to file a motion to sell, in the bankruptcy court and the judge will have to approve the debtor's motion to sell. (These are routinely rubber stamped as long as you do your due diligence.) Oh, and the Chapter 13 trustee will likely want his trustee fee (speak with the appointed trustee re: his fee)
My experience is a short sell is simply less work if the borrower is outside the BK court. But I know they can be worked within the BK system.
I meet with people all day long who are headed for a BK (for other reasons besides their mortgages). I always advise them to consider offers to short sell their home so that they don’t have the "BK" and "foreclosure" on their credit score as a negative public record.
-Matt