Filing bankruptcy after short sale approval

Asked by Rondog, 92069 Mon Sep 28, 2009

I entered the journey of buying a short sale in mid july. This sale has gone surprisingly smooth until now. The bank accepted the short sale about a month ago and we are scheduled to close wednesday. Today we were going to sign papers at the escrow office when it was put on halt because the sellers failed to provide some disclosures. They were unreachable all day and when they were finally reached, they were with their attorney.

Now my question is, do you think they are going to file for bankruptcy and cancel this whole deal? Also, is that legal considering we are in a contract (I think [forgive my ignorance, 23 year old first time home buyer here])?

The reason I have that suspicion is their is no sign of them moving out or packing and they are suppose to be out of there in less than two days.

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Answers

11
Mark Aalam, , San Diego, CA
Thu Apr 14, 2011
Whether or not the debtor can cancel the whole deal in bankruptcy depends upon whether the sale contract is determined to be an executory contract within the meaning of the Bankruptcy Code and whether or not the sale would have netted money for the Debtor which would be part of the bankruptcy estate, among other considerations. This is a complex legal question requiring consideration of multiple factors. You need to consult with a bankruptcy attorney.
0 votes
Rondog, Home Buyer, 92069
Mon Jun 7, 2010
Thank you very much and yes, that saying definitely applied to me in this case.
0 votes
Scott Schroe…, , Escondido, CA
Mon Jun 7, 2010
Good for you. See? It all works out in the end!

Someone said that good things come to those who wait. I heard a wise person add the following:
"So long as he who waits works like crazy while he waits!"

Congrats on having bought your home.

scott@scott-schroeder.com
0 votes
Rondog, Home Buyer, 92069
Thu Jun 3, 2010
The house fell through and I never got the house, but shortly after I found another house that I liked a heck of a lot more. It was newer and bigger, but a tad more expensive. It was also a short sale but I closed within 2 months of putting down an offer, so short sales can go quickly
0 votes
Scott Schroe…, , Escondido, CA
Thu Jun 3, 2010
Hey Ron, Whatever happened with this house? Did you get the transaction closed?

scott@scott-schroeder.com
0 votes
Rondog, Home Buyer, 92069
Tue Sep 29, 2009
You are right...they are suspicions. I will post back what happens. I am heading to the escrow office in a couple hours
0 votes
Mike Lewis, Agent, San Diego, CA
Tue Sep 29, 2009
Rondog, They might and they might not. Let us know what happens. Sounds like you have suspisions but no facts. People are hurting in this market. They're not doing this to be difficult they are scared and losing most of what they own. Best of luck.

http://www.dawnsellssandiego.com
0 votes
Jackie, , Santo, TX
Tue Sep 29, 2009
First I wll state that I am not an attorney and I am not giving you legal advise.

You should be discussing this with your agent and/or broker.

If in fact they are filing bankruptcy, it most likely will halt the sale at least for a short time. I suggect you speak with a bankruptcy attorney ASAP, as it might be possible that if they completet the sale and then file shortly afterwards that it could cause some issues for the buyer. I am not tryting to scare you, but you need to make sure you are protected in the transaction. Your agent and/or broker should be advising you on this

In my understanding, a lot depends on how the seller files bankruptcy. It is highly likely that the home, being an asset of the seller, would be an asset of the bankruptcy and therefore nothing can be done with it without court order. There are exemptions for assets, buit I believe untilk the bankruptcy is completed, all assets are controlled by the trustee and the court. That does not mean it will take months to get it resolved, but I would expect at least a few weeks, maybe more.

I would reccomend you speak with an attorney, maybe both a real estate and bankruptcy attorney.

Sorry for the not so good news

Of course as Joan said, it could be somethig else with the attorney

Best of luck to you

Jay Gedanken
Broker Asociate, REALTOR
SELLSTATE
858-605-5839
jay@SaveYouCash.com
0 votes
The Hagley G…, Agent, Pleasanton, CA
Mon Sep 28, 2009
Don't assume the worst! Even if they file for bankruptcy, they can exclude the home and proceed with the short sale.
Web Reference:  http://shortsalesheep.com
0 votes
Joan Wilson, Agent, San Diego, CA
Mon Sep 28, 2009
Your guess is as good as any. Never panic until you need to. See what the attorney says in the next couple of days. Maybe, they were updating their will and there visit had nothing to do with the short sale.

Good luck,
Let me know if I can help you in any way!


Joan Wilson (Realtor, SRES, Ecobroker)


California Cool 4 Sale
Prudential California Realty
Direct Phone: 760-757-3468
Fax: 760-946-7894
JoanWilson@prusd.com
License # 01341483

It is my Goal to Increase the Success and Profitability of Those I Serve
0 votes
Patrick Thies, Agent, Anytown, IL
Mon Sep 28, 2009
When someone files bankruptcy, the court issues an Order for Relief that includes an “automatic stay,” which demands that all creditors, including the mortgage lender, stop collection activity. The sale will probably end up in bankruptcy court. The bank will appoint a trustee to the case and will have to approve the sale.
0 votes
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