Filing bankruptcy? Buying time to close a deal

1 Reply

Homeowner wants to sell but the auction is in 2 days. 

A lot of investors in my area use the bankruptcy method to stop the auction and have more time to close the deal. 

I’ve never used this method. I usually send a copy of the contract to the lender and that always buys me enough time to close on the deal. 

However, if the homeowner files the chapter 13, do they have to go through the entire process a month later ? Or could they just dismiss it?

Would this be on the credit report of the homeowner if they only FILE the chapter 13 just to get more time to sell the house. 

Again, I’m not using this method, but I’m interested how this process works. 

Thanks in advance 

Hi @Denise James and welcome to BiggerPockets!

Since I don't know where you are located (which you can easily fix by completing your BP profile!), I can only generally assert that filing bankruptcy (BK) can delay the auction by a month or so, but it's a last-ditch measure. If the borrower can't make their mortgage payment, they likely can't afford to pay an attorney to file the bankruptcy paperwork.

What I have heard is of folks filing just to buy themselves the 30 days, and then not pursuing the BK all the way through so that it eventually gets dismissed. In this situation, I don't believe it would show on a credit report. However, if filing with the intent to abort midway is the plan from the start, one might have a hard time getting an attorney to play along.

My message, though, is this: You'll get much better answers here if you help us out by providing as much info as possible, starting with a complete profile.

I'll hush now and let the lawyers speak!