Investor · Denton, TX · Member since 2013 · 18 posts · 0 votes
Hi Bigger Pockets Family,
I recently ran across a deal and from the numbers standpoint it makes sense, the only catch is that the client has been unemployed for two years so to keep his house and car, he filed bankruptcy. He hasn't paid on the bankruptcy in three months, so when I contacted him he was extremely motivated to sale.
I had my attorney contact the bankruptcy attorney and was advised that he wanted a fee, to see the contract for sale of house, wanted title insurance and a HUD statement.
Normally, as wholesalers, we don't use any money and truly I'm not ready to start breaking that practice but I'm looking for insight. What would you do in this situation....
Rehabber · Smyrna, GA · Member since 2013 · 864 posts · 510 votes
12y
There's a lot more to this than I can really get out here, but I'll try to give you some insight.
First off, I'm assuming he's in a 13 if he's behind on his payments. Thats a payback type of thing and probably 80% of them dont make it all the way through, sure seemed that way when I worked them for a finance company about 15 years ago. He cant legally sell the house while he is in BK without a court order from a BK judge. Technically all his assets are subject to liquidation to pay creditors.
TX is very creditor friendly and has some homestead and head of household exemptions. Been a while since I worked that stuff, so you'll want to check the local laws.
Either way, if he's 3 months behind they'll probably throw him out of the BK pretty soon anyway, then he can sell. I'm not sure if its strictly legal, but if his plan/only course of action was to get kicked out, you could get it under contract and market it, then close after the BK was dismissed, plenty of cash buyers (that do volume) would be OK with that kinda thing, they'd just have to revisit their numbers if it goes past 30 days. Just gotta make sure there weren't any judgements when he went in, which any closing atty would do anyway.
If he files a BK7 right away, they technically can go back 90 days and unwind the sale, so you need to make sure he isnt planning on doing that. That wouldn't save his car anyway, just buy him the time to get to court to see if he was going to reaffirm that debt.