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I am the buyer on a land contract. The seller wants to get…

I am the buyer...

I am the buyer on a land contract. The seller wants to get out of the contract to go with another offer/contract. They have threatened to file bankruptcy if we do not accept a small fee to walk from our contract. Do we lose our contract if the seller files bankruptcy?

Lawyer's Assistant: What state are you in? And has anything been officially filed?

CO, we have recorded the contract with the county

Lawyer's Assistant: Has anything been filed in civil court? If so, what?

No filing in civil court

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Answered in 4 minutes by:
1/16/2018
DrakeLAW
DrakeLAW, Attorney
Category: Bankruptcy Law
Satisfied Customers: 1,038
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Here is an article that I found that does a pretty good job explaining some of the issues in this case.

http://www.kalawgr.com/blog/65-land-contracts-in-bankruptcy

The issue revolves around whether or not the land contract is considered by the Court to be an "executory contract" which the trustee can choose to accept or reject or if it is considered a security agreement, in which case, there is no discretion to terminate it and you would retain a lien against the property. It is all very case specific.

If they have assets or are otherwise in good financial shape, it seems their threat of filing bankruptcy is more of a bluff.

Please kindly rate the question so I may be credited. Thank you. You can still ask follow-up questions.

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Customer reply replied 7 months ago
Please answer if included in the original payment amount. The seller is an LLC and does not appear to have any other assets other than the land and are likely not in good financial shape - which is why they agreed to sell the land over time. We believe we flushed out a cash buyer when doing our due dilligence and the seller wants that offer instead. We also believe the other buyer (large local builder) and sellers agent (cushman wakefield) may also be liable for tortious interference with our contract.

Have they suggested what chapter they would file?

If they file chapter 7, they get nothing out of it anyway. They lose all assets to creditors, of which you would be one and if you are the only creditor it would be completely pointless. And sure, you could be on to something with that tortious claim.

Did you put money down and how long have you been making payments for and how many payments remain?

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Customer reply replied 7 months ago
Can you confirm the follow up questions are included? We put $15K down in earnest money. There are other creditors and that is why they are selling the land - to pay the creditors. We have not made a payment yet because the seller never showed up to closing as they wanted the other offer instead. They are in breach of our contract at this point. Payments of $1.5M remain to be paid over a two year period - by selling condos constructed on the land - paying them from profits of the sales. They are trying to get the $$ all at once after we talked to several local builders on the project.
Customer reply replied 7 months ago
I don't know what chapter they would file

Yes, the follow-up questions are included.

Ok, I see. Well that is a difficult business call to make, tough to say. If you haven't yet paid anything, I wonder what you have to lose calling their bluff.

DrakeLAW
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Customer reply replied 7 months ago
We could lose their $10K offer to walk from the deal. Well, it sounds like they could get out of the contract if they want to file bankruptcy. We will likely take the $10K and go after the builder and CW for tortious interference in the amount we could have made on the project. Thank you for your time.

Well...they couldn't "get out of it" in the sense they come out unscathed. They would be coming out with nothing. Just a matter of what other creditors would get out of it. It would be a scorched earth move. I assume you would get the $10k plus your $15k earnest money. You will know best based on your assessment of the parties and the situation. Best luck.

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Customer reply replied 7 months ago
I believe the creditors also own the LLC land owner that would file bankruptcy - or at least they are tied at the hip to this LLC. So, they would come out with something.

Insiders can't get paid in that manner in bk. But, it would then involve litigation, etc. So, again, have to assess the odds and what you want to go through.

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