Seller Files Bankruptcy

[Blake Pender]

I posted a thread on this subject a while back. Sure enough, the homeowner has called us back and still wants to sell his home. He claimed to have met with the trustee on May 15th and was told that 30 days later (June 14th) he would regain control of his home. He would like to sell and move out on June 15th.

The homeowner believes he was awarded a chapter 13 bankruptcy but I don't think he really has any idea what happened. Of course, he doesn't have any documentation for me to look over. I had him sign a power of attorney and plan to research everything for myself. I faxed the PoA over to his bankruptcy attorney and hopefully will be able to speak with him sometime today. If I am able to reach him, what should I ask? The attorney might tell me that he does in fact have control to sell the home but I am sure he is referring to a conventional purchase. I dont expect him to understand a sub2 deal so I need to formulate the right questions to figure out if this will still work. (eg: Is the financing with wells fargo still in place?)

The numbers on this home are good and there is good retail activity in his area so we would like to work out a deal. Any thoughts from the pros would be greatly appreciated.

[George Roddy, Jr.]

Blake,

I wouldn't focus on how you are going to purchase the property with the seller's bankruptcy attorney. Take this opportunity to find out what are the seller's options.

1. Does John Seller have the right to sell his property without bankruptcy approval.
2. If yes, move forward with the subject 2 paperwork (create a trust, create a deed).

3. If no, ask the seller's bankruptcy attorney what are the steps in purchasing a property while administered by the bankruptcy trustee. This is more complicated but you can be done. It depends on how many other creditors are owed money.


George

[Blake Pender]

Thanks for the response. The homeowner claims that he will have the right to sell his property on the 15th. I'd like to hear that from his attorney's mouth but getting him on the phone is as fun as pulling teeth. He doesn't seem very interested in returning calls unless it is billable.

[Blake Pender]

We finally heard back from the bankruptcy attorney. He said that the property will be exempt from the bankruptcy estate on June 14th. At that time the homeowner can sell the property without bankruptcy approval. So it looks like we are back on track with this deal and preparing the paperwork to take the deed into a land trust.

We have one last pressing question: How does the bankruptcy affect the original reinstatement amount? I have contacted Barrett Burke and we are still waiting on a response. Our original authorization letter doesn't cut through the new red tape created by the bankruptcy, so we are waiting for our power of attorney to go on file.

Will the reinstatement amount revert to the original amount? Or were those back payments 'forgiven' or deferred due to the bankruptcy?

[Blake Pender]

Well after talking to Barrett Burke, I found out that the reinstatement amount is wrapped into John Seller's bankruptcy plan. The loan is technically 'current' and the reinstatement doesn't need to be paid. So for now, the homeowner makes payments to the trustee and then that money is dispersed to Wells Fargo.

On June 14th, when the seller regains control of the property, we will deed the home into a trust. My question is: Where will we send the mortgage payments? Will the trustee care if he is getting a check from Blake Pender instead of John Seller?

[George Roddy, Jr.]

Blake,

On June 14th, you will need to settle up with the lender or Barrett Burke. They will have a revised reinstatement amount after the property has been pulled from bankruptcy. Once you have the mortgage current, you will mail in your payments to the lender.

Re: Check

They don't care who pays, just that a payment is made on-time. Make sure you write the loan number (acct number) on the check in the memo field. You have a POA from the seller, call Wells customer service and request all mailing go to another address (change of address request).


George

[Blake Pender]

Thanks once again for your input George. We talked to Barrett Burke and they faxed over the revised reinstatement. Something interesting to note:

His home/mortgage was excluded from the bankruptcy... however; his mortgage FEES were included in the bankruptcy plan. This includes the reinstatement. So essentially, Wells Fargo sees the loan as current. All we have to do is make the next mortgage payment.

The agent at Barrett Burke said that we could pay the reinstatement, but it is not necessary.

Does this sound plausible? If so, we are very pleased with our first deal.

Blake

[George Roddy, Jr.]

Plausible? No

I think eventually all amounts owed will want to be recovered by the lender. They will most likely add any/all fees to the payoff amount. Short term, good deal (not as much capital needed). Long term, read the fine print.


George