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socrateaser
socrateaser, Attorney
Category: Bankruptcy Law
Satisfied Customers: 34089
Experience:  Attorney and Real Estate Broker -- Retired (mostly)
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we know someone filing bankruptcy (dont know if its 7 or 13),

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we know someone filing bankruptcy (don't know if its 7 or 13), he has moved out of his house and we want to purchase it. he claims we have to wait until the date he files, otherwise it would mess up his filing, something to do with income.. we don't want to lose out on the house for waiting too long to start proceedings of our own. is it possible to work with his bankruptcy attorney that would in-turn work with the bank to pre-sell it to us ? so on the date of filing we can close on the property as well ? he does owe back taxes and needing to know if we'd be responsible for those also.. any suggestions on the best way to proceed so we don't lose out on the house?
Submitted: 5 years ago.
Category: Bankruptcy Law
Expert:  socrateaser replied 5 years ago.

The seller is likely being a bit paranoid. However, were you to arrange some deal with the seller and/or bankruptcy attorney in advance of the bankruptcy, that transaction would be voidable by the bankruptcy trustee as a preferential transaction. And, because you made an "inside" deal, the bankruptcy trustee could void the transaction up to one year after it occurred. So, you would likely be shooting yourself in the chest with your contemplated action.

 

If the seller files Chapter 7, then the property is the bankruptcy trustee's, and if you want to buy it, you'll have to buy it from the trustee (which is possible, because I've done it before) -- although the trustee is "supposed" to put the property up for public sale.

 

If the seller files Chapter 13, then once the bankruptcy plan is confirmed, the seller can sell to you directly, and depending upon the net proceeds, the trustee could request that the bankruptcy plan be modified -- but, that would be the seller's problem -- not yours.

 

Hope this helps.

 

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Customer: replied 5 years ago.
just to be clear... if it's chapter 7, as soon as he's filed, we contact his attorney (he is probably the trustee) we CANNOT do this in advance due to it being an "inside deal".. (do you suppose the amount to purchase it would be the balance at the bank along with back taxes ? or would it be appraised value ?

if it's a chapter 13, the seller still has the right to sell it to us (i'm assuming the balance at the bank plus the back taxes.. the seller may or may not modify his bankruptcy - but that would not matter to us

correct ?
Expert:  socrateaser replied 5 years ago.

The trustee is not the debtor's attorney. The trustee is appointed by the bankruptcy court to act on behalf of the debtor's creditors in the administration of the bankruptcy estate (the debtor's property).

 

The trustee must legally try to maximize the value of the property in a Chapter 7, but sometimes selling quickly and avoiding real estate commissions and appraisals is viewed in the creditors' interests. Which is why I said it's possible to do this deal. However, it will take some finesse unless you happen to have a "relationship" with the trustee.

 

In Chapter 13, after the Plan is confirmed, the property vests back in the debtor. So, it's his/hers to sell for whatever price he/she can get.

 

socrateaser, Attorney
Category: Bankruptcy Law
Satisfied Customers: 34089
Experience: Attorney and Real Estate Broker -- Retired (mostly)
socrateaser and other Bankruptcy Law Specialists are ready to help you
Customer: replied 5 years ago.
thank you for your responses, it points me in the right direction...

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