Took Title By Way Of Trust- Seller Declared Bankruptcy
please help!
we put a property into a family-named trust, gave the seller the $1200. they wanted, paid back payments, and have renovated the property-we have spent a raw $5000.-not considering our time! we have the "beneficial interest"-
long story short- seller has decided to declare bankruptcy and bk attny says it is fraudulent to leave the "debt" out....i spoke with the attorney and he says that the bk trustee will probably undo the transfer?!?!?!?!
boy o boy do i need john locke or someone as creative to tell me what i can do to prevent this loss? if i have lost my money and time, how can i avoid this in the future?
or is the seller and his attorney just bullying me around?
most of our deals so far have been pre-foreclosures and this is really worrying me- because this could happen in every situation....there must be some way to protect myself??????
calling all creative thinkers and doers.....throw me a life-preserver!
General principle about bankruptcy...
Deals done for 90 days (maybe the '90' is not exactly correct), deals that have been done can be unwound. The point is they do not want a person going into bankruptcy to dump assets and then claim they have nothing left.
Look for advice from the board. Be very prepared to have a lawyer respond to any legal actions taken against you and the property. You may not lose anything but you might have to live through the process and pay some legal costs.
John
Kim,Its sad but you have more than likely lost your $5,000.00. Usually bankruptsy trustees look suspisiously at all property transfers under a year old. A friend of mines law firm was the bankruptsy trustee in Birmingham,Al. He explained to me that the judges will make the person going bankrupt go back as far as 5 years on property transfers. You may have to go to the bankruptsy judge and explain to him that you did not know the homeowner was about to file bankruptsy.
thanks for your replies!!!
has anyone seen this before???
there has to be something that i can do in the future? or am i just rolling the dice each and every time?
what about the fact that my trustee is assigned to the trust that owns the property? is it possible that without my trustee signing off that the seller would have to wait to file???
it just seems that in the world of debtors that many of us are dealing with, that this has had to come up and someone has been able to solve this dilemma????
Kim
This is a delema! Would this also apply to any pre-forclosure or subjaec to dael. Just hold your breath and hope the financialy strapped individual you are dealing with dosent file? I never considered the impact of this? Is there any solution?
Thanks for any advice
Speak to the seller and see if you can get him to have his attorney withdrawn the petition for bankruptcy.
Once this is done, sell the house asap.
Explain to the seller what you have to lose after trying to help him. Tell him not to file BK for 4-6 months after the sale of the house. Otherwise, the foreclosure will show up on his credit. With the mortgage up to date, there is no reason to file BK right now. Good Luck!
First of all you deal with a Bankruptcy Trustee not the Judge.
Unless there is a great amount of equity why would the court want the house back? You explain to the Trustee what happened, he or she can release the property from the Bankruptcy, I know because I have done it.
What the court is looking for is someone who transferred the property to a relative or friend to avoid declaring any money or equity that may be derived from the property. In the case of an investor he is a third party innocent.
When you talk to the Trustee,is there any real equity in the property worth while to foreclose on the property. If you know how to eliminate precieved equity you will be fine.
Also, debts paid after one files BK are released from the Bankruptcy, the first thing an attorney tells his client is not to pay any bills unless you intend on keeping the item, lets say an automobile you just purchased that you want to keep, just make the payment and keep driving.
This is not legal advice just practical expierence from doing deals when a seller filed BK.
John $Cash$ Locke
Cash hit the nail on the head.
Another thing you might consider is to encumber the house.
By this, I mean to record a lein on the house, from an entity, named other than you, against the title.
This takes away any 'equity' the place might have, and very well could help convince the BK trustee to leave well enough alone.
Most times, when explained that you purchased the property, placed money into it, and paid the seller to stop the house from going to F/C, they'll not mess with your deal.
After the fact, when the mortgage or deed of trust has been included and discharged in the sellers BK, you will then own a house, with a mortgage on it, which has no personal recourse.......merely foreclosure to get the house back, if you default.
I have several of these, and love them.
Of course, I'm not an attny, so get the advice of one to verify anything you read here.
Take care and good luck,
Jim FL
P.S. Yes, I think the BK attny and seller might be trying to bully you,,,,,,,,,,,based on something they perhaps don't understand.
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again...thanks so much for all your help....as the days have progressed and my stree, decreased....everything "seems" to be okay! we have heard nothing from the sellers since the call concerning their desire to declare BK. We think that their BK attorney wnated them to push us to get a quick sale to move forward with their BK. <also, he had no clue about what we were doing> up to this point, we have been giving buyers/sellers all copies and have been advised to keep this to a minimum...
investorkim,
Good idea.
I don't give sellers copies of everything.
when I buy sub2, the sellers get a copy of the purchase agreement and addendums, a CYA form, a HUD-1, and when they request it, I'll mail them a copy of the deed when I get it back stamped from the recorder.
Aside from that, the trust docs etc, stay with my staff, in a secure location, for confidentiality purposes.
Good luck with your situation, sounds like things will be fine.
Take care,
Jim FL
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