"Sub2", Mortgagor filing bankruptcy

8 Replies

The mortgagor of one of my "sub2" deals asked me if I would be effected if he/she files bankruptcy.  Currently home is deeded to a land trust.  I own several "sub2" homes and this has never come up.  Has anyone experienced this?

It will because he needs to list it in the bankruptcy filing and at that time, the bank will know that they did a subject2 so be prepared to lose what money you have in it and refund any money you collect from someone else and no matter a land trust means nothing because the mortgage is in his name. Land trust or LLC is only a shame that gurus teach.


Joe Gore

Thanks for the response @Joe Gore .  I guess I will need to try and payoff this home before they file.

I have never been nor do I plan to go to a gurus seminar. I use land trust for anonymity purposes in which the beneficiary is a series LLC. I would have to agree to disagree with you on this matter.

Rocky

No experience with this, but it seems likely it prompt the bank to file foreclosure.

No talk of foreclosure.  Mortgagee remains happy as back payments were caught up and payments are now on autopay.  I guess this particular mortgagor had other debt that they can not handle and are now contemplating bankruptcy.

Here's a past Sub2 thread dealing with this specific question. It seems like you may be ok based on the posts there.

Some of this is not clear.  

IF the property title is held in a Trust, who is involved in that Trust?  Who is the beneficiary and who is the Trustee.  To some degree, the borrower sounds more like a tenant of sorts, perhaps in a Land Contract?  

That detail makes this less than straight forward as the Trust as an asset may not be included in the BK depending on the details.

You cannot hide a property that is finance in a trust to keep it out of bankruptcy like the gurus teach.


Joe Gore

The bank will learn about the subject to, but the big thing for them (usually) is that they receive their payments. I would guess the bank will not foreclose. But be prepared if they do. So I would try to line up a way to payoff the mortgage, but foreclosures take time, you don't have to make a move until the bank does (or doesn't).