Bankruptcy Law

Bankruptcy Law Questions? Ask a Bankruptcy Lawyer.

Ask a Lawyer,
Get an Answer ASAP!

Bankruptcy Law
This answer was rated:

My parents owned a piece of farm land for years. They sold

the land to someone I...
My parents owned a piece of farm land for years. They sold the land to someone I know to basically hold temporarily. I agreed to make the mortgage payments and was planning on purchasing the property from my friend.....however, I was unable to get a loan. That was 2.5 years ago. He put my parents back on the deed in May of 2009. Although I have been making the mortgage payments, he just told me he is planning on filing a chapter 7. The auditors website has the land appraised at $450K. The mortgage on the property is $309K. There was a 2nd mortgage on paper that was never filed. He says he plans to reaffirm the land along with his house. Please let me know what the risk is in my parents losing their land.
Show More
Show Less
Ask Your Own Bankruptcy Law Question
Answered in 7 hours by:
2/3/2010
Brent Blanchard
Brent Blanchard, Bankruptcy Attorney
Category: Bankruptcy Law
Satisfied Customers: 1,975
Experience: Twelve years experience in all aspects of debtor & creditor BK.
Verified
If the person who "temporarily" held the property is not an "insider" (relative or business partner), the transactions would probably not come under scrutiny. The 12-month rule on real estate transactions being scrutinized applies more to sales, as the BK code and the Trustee who looks into the filings are interested in whether assets were sold for substantially less than market value, or under circumstances likely to "hinder, delay or defraud" creditors.

Re-affirming on a debt secured by land in a BK case really rarely carries more risk of losing the land than one has without a BK case being in play--stay non time with all the payments and there is no risk of foreclosure, for example.

The complication is whether the land is "necessary" for re-organization in a Chapter 13 case or Chapter 12 family farm case (as in provides part of the income needed to make the Plan payments), or if it's just an excessive-value non-exempt asset in a Chapter 7 liquidation. If there is an excess of non-exempt value, then the Debtor is often required to "buy out" the asset in the BK by borrowing against it and making the dollar value of the asset available to the creditors. That outcome is far more common than the Trustee forcing a sale of the property at auction, paying off the loan, and making the net proceeds available so the creditors don't lose more than they would have.

BK law is a balancing act between the legal rights of the creditors to be paid as agreed by the Debtor, and the Debtor's equitable right to get relief from his or her debts.

BTW, land is almost always worth more than the auditor or other taxing authority puts it--everyone wants to own a dump at tax time, but have a Tau Mahala when it's time to sell.

Make sure your parents get their money's worth out of their BK attorney.
Ask Your Own Bankruptcy Law Question
Customer reply replied 7 years ago

1. Are you saying that him putting my parents back on the deed 9 months ago will not be scrutinized?

2. You said: the Debtor is often required to "buy out" the asset in the BK by borrowing against it and making the dollar value of the asset available to the creditors.

a. What financial institution would allow the partial land owner to borrow against the property to pay creditors if he is in the process of bankruptcy? b. Also, since my parents are on the deed(as of 9 months ago) wouldn't they have to agree to him borrowing against the property? Should my parents get an attorney knowing he is going to file ch. 7? I was told by his atty. it is too late for my parents to file the 2nd mortgage my friend owes them (on paper). Is this true? Should they file it? Prior to him filing the Ch.7?

More new questions!

1. Probably not, if the person is NOT an "insider". Less likely anyway because it was a purchase rather than sale, BUT more likely again if the payment obligations made him insolvent.

2.
a. That's their business decision. Unwillingness to loan is sometimes overcome by getting paid a higher interest rate. No one can predict how this will play out without complete information and even then we're sometimes wrong because other players are involved.
What's this about a "partial land owner"? If "put my parents back on the deed" means adding them and staying on himself (instead of just giving it 100% away), then the situation gets even more complicated than I thought.
b.
1) Your parents agreeing to "him" borrowing against jointly-owned property??? Depends on how title is held. Tenancy in common *can* be encumbered/borrowed against only as to each person's share...again, if a lender is willing at an interest rate you can live with.
2) Yes, yes, YES!!! What you describe sounds like a situation that even an attorney could screw up. Be careful who you choose.
3) A loan encumbering land can be recorded any time. It's just a question of who gets to stand at the front of the line (priority position). If the document(s) are properly written, the act of recording will create a consensual lien on the property, known to the world.

Thank you.

Please do not forget to click the green "Accept" button so I can be paid for my work. Bonuses are greatly appreciated if you are happy with the quality of the answer(s).

BB.
Ask Your Own Bankruptcy Law Question
Customer reply replied 7 years ago
I want to summarize: My parents owned the land for many years it has been in the family. They sold it to the Non-insider. The non-insider had to take out a mortgage in his name only in order to purchase the property. That was 2.5 years ago. I have been making the mortgage payments for 2.5 years on time every month. He put my parents on the deed with him and his wife 9 months ago. It was recorded 9 months ago. I just found out he is filing chapter 7 today. They will not wait or delay. They are filing today. He plans to reaffirm the property. If the trustee forces a sale. 1.What rights do my parents have. 2.Is the non-insider responsible for buying them out? 3.How does the equity get divided? Is there anything they can do at this time to make sure they don't lose the land in his bankruptcy? I do plan on giving you a bonus for your time. I appreciate your patience with me.
Had some unexpected travel the past three days.

Will post more either tonight or tomorrow night.

Wanted to make sure you knew you are not forgotten.

BB.
Ask Your Own Bankruptcy Law Question
Back to the questions at hand...

First of all, I just want to make sure that I understand the situation correctly--it's the BUYER who is filing Chapter 7, not your parents. The parents are on a deed which is implicated in the BK.

1.What rights do my parents have.
Because it sounds like the buyer's mortgage paid off your parents in full (regardless of the fact that YOU were making the payments for him...), their rights are going to be limited to the dollar value of their share of the land. If the land is worth less than the outstanding loan plus all foreclosure costs ($$ouch!), then they really have no rights that come down to money.

2.Is the non-insider responsible for buying them out?
Only if the court orders the land sold, and they have some equity in the property. If he wants to re-affirm on the debt and keep the land AND the buyer's equity in the land is below the Ohio exemption limit, then he *could* keep the land and nothing really changes. The "buy-out" if needed and allowed would almost certainly be from the sale proceeds.

3.How does the equity get divided?
Generally-accepted accounting practices will trace purchase price exchanged at each transaction. The exact language of the deed will also help control the answer. If the parents really paid nothing for getting back on the deed (and the land was paid for in full TO THEM by the mortgage), and there was no equity in the land when their names showed up on the later deed, then they really own nothing from a financial standpoint. An X% share of land which has zero equity is still zero, because the lender gets to take its value out FIRST, before anyone else gets paid.

On the other hand, even if they paid nothing, there could be a legal gift of whatever share of the property was stated in the deed of conveyance. There *might* be a presumption of half and half with the buyer, but that depends on the language of the deed and Ohio law. That requires an personal consultation with full review of the documents.

Is there anything they can do at this time to make sure they don't lose the land in his bankruptcy?
The most reliable way to save their ownership interest as shown on the deed would be to buy out the buyer, which results in the dollars of that sale going into the BK estate. DO IT AFTER MOTION AND GETTING PERMISSION OF THE COURT and pay the money through escrow to the BK Trustee. If the buyer takes the money and runs, the feds will be all over everyone with accusations of trying to defraud the buyer's creditors.

I do plan on giving you a bonus for your time.

Thank you. I often work way too hard on some of these questions.

BB.
Brent Blanchard
Brent Blanchard, Bankruptcy Attorney
Category: Bankruptcy Law
Satisfied Customers: 1,975
Experience: Twelve years experience in all aspects of debtor & creditor BK.
Verified
Brent Blanchard and 87 other Bankruptcy Law Specialists are ready to help you
Ask your own question now
Ask Brent Blanchard Your Own Question
Brent Blanchard
Brent Blanchard
Brent Blanchard, Bankruptcy Attorney
Category: Bankruptcy Law
Satisfied Customers: 1,975
1,975 Satisfied Customers
Experience: Twelve years experience in all aspects of debtor & creditor BK.

Brent Blanchard is online now

A new question is answered every 9 seconds

How JustAnswer works:

  • Ask an ExpertExperts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional AnswerVia email, text message, or notification as you wait on our site. Ask follow up questions if you need to.
  • 100% Satisfaction GuaranteeRate the answer you receive.

JustAnswer in the News:

Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... Justanswer.com.
JustAnswer.com...has seen a spike since October in legal questions from readers about layoffs, unemployment and severance.
Web sites like justanswer.com/legal
...leave nothing to chance.
Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.
Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.
I will tell you that...the things you have to go through to be an Expert are quite rigorous.

What Customers are Saying:

Mr. Kaplun clearly had an exceptional understanding of the issue and was able to explain it concisely. I would recommend JustAnswer to anyone. Great service that lives up to its promises!

Gary B.Edmond, OK

My Expert was fast and seemed to have the answer to my taser question at the tips of her fingers. Communication was excellent. I left feeling confident in her answer.

EricRedwood City, CA

I am very pleased with JustAnswer as a place to go for divorce or criminal law knowledge and insight.

MichaelWichita, KS

PaulMJD helped me with questions I had regarding an urgent legal matter. His answers were excellent.

Three H.Houston, TX

Anne was extremely helpful. Her information put me in the right direction for action that kept me legal, possible saving me a ton of money in the future. Thank you again, Anne!!

ElaineAtlanta, GA

It worked great. I had the facts and I presented them to my ex-landlord and she folded and returned my deposit. The 50 bucks I spent with you solved my problem.

TonyApopka, FL

Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help.

Mary C.Freshfield, Liverpool, UK

< Previous | Next >

Meet the Experts:

Terry L.

Terry L.

Attorney

2,679 satisfied customers

Better Business Bureau. 18yrs bankruptcy experience. Chicago Bar Assoc. American Bankruptcy Institute member.

cortrightlaw

cortrightlaw

Attorney

511 satisfied customers

Attorney practicing Bankruptcy Law including Chapter 7, Chapter 11, Chapter 12, and Chapter 13.

JoeLawyer

JoeLawyer

Attorney

376 satisfied customers

Attorney in the practice of Bankruptcy Law since 1996

A.J.

A.J.

Attorney

262 satisfied customers

Experienced consumer bankruptcy attorney.

Fritz

Fritz

Attorney

209 satisfied customers

Florida attorney with extensive experience in Chapter 7 and Chapter 13 consumer bankruptcy cases

Law Girl

Law Girl

Attorney

153 satisfied customers

I am an attorney.

Paul K, Esq.

Paul K, Esq.

Attorney

141 satisfied customers

10 years Exp., Great customer service, Prompt responses.

< Previous | Next >

Related Bankruptcy Law Questions
I have the same question. I had a Chapter 7 bankruptcy 13
I have the same question. I had a Chapter 7 bankruptcy 13 years ago. I have not seen on my credit report for the last 6 years. The SBA question says have you ever had a bankruptcy? Is it fair to say n… read more
INFOLAWYER
INFOLAWYER
Partner
Doctoral Degree
56,297 satisfied customers
What happens i file chapter 7 bankruptcy and judge denies my
Second opinion] What happens i file chapter 7 bankruptcy and judge denies my reaffirmation agreement...will they repo my car or will the co signer be able to keep it… read more
DrakeLAW
DrakeLAW
Juris Doctorate
984 satisfied customers
What happens i file chapter 7 bankruptcy and judge denies my
What happens i file chapter 7 bankruptcy and judge denies my reaffirmation agreement...will they repo my car or will the co signer be able to keep it… read more
Phillips Esq.
Phillips Esq.
Attorney
Juris Doctor
18,377 satisfied customers
I am probably going to need to file a Chapter 7 bankruptcy
I am probably going to need to file a Chapter 7 bankruptcy in Minnesota because Geico is suing me for $100K for personal injures sustained by someone else that was involved in an accident. I am fighti… read more
DrakeLAW
DrakeLAW
Juris Doctorate
984 satisfied customers
I have a chapter 7 in process in las vegas, nv. I have a
I have a chapter 7 in process in las vegas, nv. I have a court date set for a reaffirmation agreement for my mortgage. I would like to change my court date to a more current date. What motion with the… read more
Phillips Esq.
Phillips Esq.
Attorney
Juris Doctor
18,377 satisfied customers
I filled chapter 7 and discharged a mortgage with Wells
I filled chapter 7 and discharged a mortgage with Wells Fargo in 2009. I did not reaffirm the mortgage but I continued making payments for these eight years. I requested a payoff from Wells Fargo and … read more
DrakeLAW
DrakeLAW
Juris Doctorate
984 satisfied customers
I have filed a chapter 7 back in June of this year.. today I
I have filed a chapter 7 back in June of this year.. today I got into an accident to which the other party was at fault.. i has to go to the hospital... if I am … read more
Roger
Roger
Litigation Attorney
Doctoral Degree
26,871 satisfied customers
I am considering filing a chapter 7 personal bankruptcy. I
I am considering filing a chapter 7 personal bankruptcy. I know some years ago there were some changes in the bankruptcy laws. What I need to know, first of all, is how much money can be retained in a… read more
LegalGems
LegalGems
Juris Doctorate
10,717 satisfied customers
Interested in information concerning personal chapter 7
interested in information concerning personal chapter 7 bankruptcy as a member of a 50/50 LLC … read more
DrakeLAW
DrakeLAW
Juris Doctorate
984 satisfied customers
Regarding my chapter 7 ProSe on the Reaffirmation $2000
Regarding my chapter 7 ProSe on the Reaffirmation $2000 behind on payments, $6000 equity in car Obviously, we don't want to be Repo'd with all that equity.My husband went to the reaff hearing today an… read more
Terry L.
Terry L.
Attorney
Doctoral Degree
2,679 satisfied customers
Regarding my chapter 7 Reaffirmation hearing tomorrow,
Regarding my chapter 7 Reaffirmation hearing tomorrow, husband is going without me. $2000 behind on payments, 6000 equity in car. When I try to talk to the people at "ascension capital" who do Cap1's … read more
Phillips Esq.
Phillips Esq.
Attorney
Juris Doctor
18,377 satisfied customers
We filed chapter 7 bankruptcy in California with the intent
We filed chapter 7 bankruptcy in California with the intent on reaffirming the car.We are 90 days out with a report of no distribution and "awaiting discharge" on Pacer.We have $6000 equity in the car… read more
DrakeLAW
DrakeLAW
Juris Doctorate
984 satisfied customers
BANKRUPTCY: Debtor is filing Chapter 7 bankruptcy; and
BANKRUPTCY: Debtor is filing Chapter 7 bankruptcy; and elected to surrender their vehicle. Can the Creditor repossess the vehicle while the bankruptcy case is still open? Debtor has not received a dis… read more
LegalGems
LegalGems
Juris Doctorate
10,717 satisfied customers
BANKRUPTCY: A debtor wants to file a personal Chapter 7
BANKRUPTCY: A debtor wants to file a personal Chapter 7 bankruptcy and owns a small business. They are filing mostly consumer debts. Can the Debtor continue to run their small business and generate in… read more
LegalGems
LegalGems
Juris Doctorate
10,717 satisfied customers
If you file a chapter 7 bankruptcy and I own a house free
If you file a chapter 7 bankruptcy and I own a house free and clear that's worth 15000 can I keep the house? if so do I have to claim it as an exemption… read more
LegalGems
LegalGems
Juris Doctorate
10,717 satisfied customers
This is a Chapter 7 question. The Debtor was unemployed for
This is a Chapter 7 question. The Debtor was unemployed for 4 of the last 6 months, having worked the last 2 months. Her currently monthly income amount is above the local median, but averaged over th… read more
Terry L.
Terry L.
Attorney
Doctoral Degree
2,679 satisfied customers
My parents filed chapter 7 bankruptcy. They received a
My parents filed chapter 7 bankruptcy. They received a letter back from the attorney they hired and the letter stated, "they are over the limit on the allowable exemptions for a chapter 7".What does t… read more
Ray
Ray
Lawyer
Doctoral Degree
30,877 satisfied customers
After a Chapter 7 Bankruptcy, an Equity loan was reaffirmed,
After a Chapter 7 Bankruptcy, an Equity loan was reaffirmed, but only by the husband. The wife never signed. Does this mean that the loan company now has lost consent? In her not reaffirming the loan … read more
PaulmoJD
PaulmoJD
Attorney At Law
Doctoral Degree
106 satisfied customers

DISCLAIMER: Answers from Experts on JustAnswer are not substitutes for the advice of an attorney. JustAnswer is a public forum and questions and responses are not private or confidential or protected by the attorney-client privilege. The Expert above is not your attorney, and the response above is not legal advice. You should not read this response to propose specific action or address specific circumstances, but only to give you a sense of general principles of law that might affect the situation you describe. Application of these general principles to particular circumstances must be done by a lawyer who has spoken with you in confidence, learned all relevant information, and explored various options. Before acting on these general principles, you should hire a lawyer licensed to practice law in the jurisdiction to which your question pertains.

The responses above are from individual Experts, not JustAnswer. The site and services are provided “as is”. To view the verified credential of an Expert, click on the “Verified” symbol in the Expert’s profile. This site is not for emergency questions which should be directed immediately by telephone or in-person to qualified professionals. Please carefully read the Terms of Service (last updated February 8, 2012).

DISCLAIMER: Answers from Experts on JustAnswer are not substitutes for the advice of an attorney. JustAnswer is a public forum and questions and responses are not private or confidential or protected by the attorney-client privilege. The Expert above is not your attorney, and the response above is not legal advice. You should not read this response to propose specific action or address specific circumstances, but only to give you a sense of general principles of law that might affect the situation you describe. Application of these general principles to particular circumstances must be done by a lawyer who has spoken with you in confidence, learned all relevant information, and explored various options. Before acting on these general principles, you should hire a lawyer licensed to practice law in the jurisdiction to which your question pertains.

The responses above are from individual Experts, not JustAnswer. The site and services are provided “as is”. To view the verified credential of an Expert, click on the “Verified” symbol in the Expert’s profile. This site is not for emergency questions which should be directed immediately by telephone or in-person to qualified professionals. Please carefully read the Terms of Service (last updated February 8, 2012).

Show MoreShow Less

Ask Your Question

x