I put in an offer on a home that we found on the MLS in Philadelphia. This offer was accepted and we proceeded down the line with financing, title, earnest money, option money,etc… The day before we were to close the seller informed me he was in bankruptcy (Ch 7) and couldn't close. Closing was pushed back because courts needed to approve the deal. 

I read the last court filings and it asks the seller to find a deal.

The deal fell through in the courts. I was told they took a cash offer.

I contacted a real estate lawyer but again it seems at this point I'd be digging a bigger hole retaining him. 

My question are 1. How can my signed agreement be dismissed like that? 2. Who is responsible for my expenses incurred?

I know most people will say that the seller is responsible for my expenses and I agree. But it would be very difficult to collect from someone who is in bankruptcy and not worth my time.