Real Estate Broker · Fort Collins, CO · Member since 2013 · 20 posts · 4 votes
I have a meeting with a very motivated seller on Thursday who filed for bankruptcy in January. Before I can analyze this deal I feel like I need more info, and need authorization to talk to seller's lender and BK trustee. What should I find out from this meeting?
What I know:
We are in Colorado
Seller said she is 4 months behind on payments, but i don't see an NED filed on county public trustee site.
I know she has a BK attorney
Her principle balance is around 162k, but do not believe this is final payoff
My desktop evaluation of the house is 180-185k
What I don't know:
What type of BK she has filed
If the BK trustee is requiring the sale or not
Does the bank have any say in price i.e. short sale, or just the trustee?
Corte Madera, CA · Member since 2011 · 59 posts · 38 votes
12y
Almost certainly she filed Chapt 13 since there are assets involved. It is extremely difficult to buy a house out of bankruptcy. The Trustee has final say. Remember that the Trustee's primary goal is do see that all creditors receive as much cash as possible. He has no interest in you getting a good deal. Normally for the Trustee (and therefore the court) to approve the sale, it would have to be at a minimum of 90% of a BPO of FMV done by a licensed realtor, so there goes your wholesale deal. It's much better to wait and see if the BK falls out, most do, and then you can approach the owner direct. Most BKs are either dismissed, typically for failure to make plan payments or to file docs timely. Or, the lender can file a Motion for Relief of Stay. If the court grants it then the house is removed from the automatic bankruptcy stay and the lender can proceed to foreclosure. This is your other opportunity to approach the owner prior to the auction.
Corte Madera, CA · Member since 2011 · 59 posts · 38 votes
12y
Dave,
First I am not an attorney, just an investor who invests in houses when the bankruptcy fails. When someone files BK, the law grants an immediate "stay" i.e. halt to all collection efforts. No creditor can phone, write or otherwise attempt collection until the BK is finalized in some way.
A creditor would request a Motion for Relief of Stay, typically when plan payments are delinquent. The lender would file the motion and a hearing is held. If the judge grants the motion, the stay is lifted and the house debt no longer has the bankruptcy protection and the lender can pursue collection, including foreclosure.
The Trustee can also file motions for dismissal for a variety of reasons, often the creditor has caused unreasonable delay which is prejudicial to creditors' rights or has failed to file required documents timely.
Having said that, I would really not recommend BK investing for someone new. It can be complicated, time consuming, and expensive. You have to periodically check on the federal court site www.pacer.gov to see the status of the case so you know if and when a request for dismissal or Relief of Stay has been filed AND granted. Pacer charges $0.10 per page. Doesn't sound like much but it adds up fast.