Seller Claims Bankruptcy Just Prior to Close of Deal

[David Ferrette]

About a month ago we had an odd scenario take place. We put in an offer on a home that we found on the MLS in Austin. This offer was accepted and we proceeded down the line with financing, title, earnest money, option money,etc… The title report indicated that the seller had or was in bankruptcy (I am still trying to get clarification on this). In review of the report I saw this bankruptcy and raised the question to the title company. They never got back to me. The day before we were to close the seller said that she didn't want to sell and now had enough money to keep the house. After notifying her that she was in a legal contract to sell the house, she admitted that she was actually in the bankruptcy process and cannot sell the house.

Needless to say the deal fell through. My question are 1. Shouldn’t title have caught this and red flagged it immediately 2. Who is responsible for my expenses incurred

I know most people will say that the lady who broke the contract is responsible for my expenses and they are probably correct. But it would be very difficult to collect from someone who is in bankruptcy and not worth my time.

My realtor says that he has never had this happen to him and a friend who own an escrow company says he has never seen this situation either. I would like to get the BP communities thoughts on this subject.