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Purchasing Real Estate in Bankruptcy Court

Homeowner’s will do anything to save the home. The homeowner goes against his best interest most of the time by filing a bankruptcy to stop the foreclosure with no real chance of succeeding in the bankruptcy court. Some homeowners just use the bankruptcy court as a way to get time to liquidate their assets at a higher price.

We can and have purchased properties while they are in bankruptcy by following the precise rules set out in the Federal Bankruptcy Court Local Rules. It is essentially a five step procedure that adds approximately 45 days to the process. The steps are as follows: 1) Signed Release; 2) Enter into a Purchase and Sales Agreement; 3) File Motion For Leave to Sell; 4) File Notice of intended Private Sale and 5) perform a closing and pay the money.

If you are using the Frontgate system thezse houses will be in your routes prior to the bankruptcy being discharged. Again this is your opportunity to meet a homeowner who wants to sell their house. So get to the property early and often and establish your contact with the homeowner.

OTHER PROVISIONS

A. Liquidation of assets to be used to fund plan:

Debtor is going to sell her house to pay the Plan. Debtor has already put the house on the market. While the house is on the market, the Debtor will pay the monthly principal and interest to the secured lender.

So now we know that the homeowners want to sell the house. We just need to get the house at the right price. Now if you were to purchase a house out of bankruptcy there will be a few different steps than the way that we purchase other properties. First, you are going to get the property the same way that we normally purchase property.

Step 1: Get a Release signed

A release is signed. We send the information to the bank. Bank gives us a payoff number.

Step 2: Get Purchase and Sale Signed

We go back with a purchase and sales agreement with one extra term. Approval of the Bankruptcy Court.

Standard Bankruptcy Purchase and sale agreement.

Step 3: Motion For Leave to Sell

We will need to have the lawyer for the homeowner or our lawyer file a motion for leave to sell the property free and clear of all liens and encumbrances. This is an added step to our usual purchase process. Once the motion is filed they attach the purchase and sales agreement and wait for approval of the players in the bankruptcy court. The trustee, any of the creditors and the judge can nix the deal during this period. This process takes approximately ten (10) days. Here are some pertinent parts of the Motion for leave. You will see these attached to the property you

are working on if you purchase in a bankruptcy situation.

Step 4 Notice of Intended Private Sale

Next, the Homeowners attorney or ours if the homeowner is filing the bankruptcy on his/her own will file a notice of intended private sale of estate property and a deadline for submitting objections and higher offers and hearing date. This notice is submitted and then published at the bankruptcy court for a period of twenty days.

Step 5 Closing

Once the 20 day period is completed you can have a regular closing.

Conclusion

Purchasing out of the bankruptcy court allows us to have the property vacant on the date that we purchase. There is no need to have a use and occupancy signed. Next, we can use the Bill of Sale method to put some cash into the pocket of the homeowner as well.

Good hunting.

[http://frontgateconsulting.com/]

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