Well, things do go south. When they do, you can only do your best with what you’ve got and try to protect what you have left I guess.
That being said, everything I say from here on out is is not legal advice and you should obviously consult legal counsel before making a decision on your course of action.
Here’s what I would do…I would go Ch 7 BK.
The word on the street is that a FC is significantly more devastating than a BK. So if you have one house going down then the credit is pretty much shot as it is.
Going BK would help insulate you from the possibility of a deff judgment resulting from the foreclosure. In addition, if you have a load of other debt (there’s like a 75% chance of that if you live in America) then you can flush all that away as well.
You are usually allowed to keep one car for you and one for the wife. You are usually allowed to keep your primary residence.
If you have other investment properties, they usually don’t require you to sell those unless you have a significant amount of equity. (again, doesn’t sound a position that you find yourself in…I’m guessing zero equity)
Finally, if you file for BK you can probably include the tenants in the BK to avoid any further financial repercussions from that angle in the future.
As you can see…it’s a touchy subject and you need the advice of a good BK attorney before charging forward with it all.
One of my houses is being foreclosed on. Everything I tried, to prevent this unhappy event, has failed. The real issue is that I have signed a lease/option with my “renters”. They are suing me for cost of moving, repairs that needed to be done (as option consideration) and the 5 months they occupied the property. I really want to treat them as fairly as possible but I’m concerned the judge may look at the Option and suggest they could owe them more for “lack of performance”. They have agreed to meet me before the court date. Any suggestions?
Posted by Chad (MD) on November 30, 2008 at 18:24:03:
So the tenants want to be reimbursed for the cost of moving? Sounds fair, since they have a lease and have to move through no fault of their own. And repairs they did on the property? That’s fair as well, since tenants aren’t normally responsible for their own repairs. And the option consideration? Yes, they deserve to be reimbursed for that, since you aren’t able to sell them the property according to the agreed upon terms.
So it’s obvious they have suffered damages and deserve to be compensated.
I’m no expert, but I don’t see why they should be receive all of their rent back for the five months they lived there, no do I see what other damages they incurred due to your lack of performance.
None of us have enough info about the situation to give you anything but a shot-in-the-dark advice here… Sounds like you have entered into a L/O with a T/B in hopes to be able to cure your problem here, and it hasn’t worked. I am assuming that if you had funds, you would cure the defaulted mtg and make the fc disappear… so I you can’t fix that problem how can you refund to the T/B…?
Yes, they can sue you and potentially get a judgment against you… I would be more concerned about the potential of some criminal theft or fraud charge out of this. This is a growing problem where LL’s accept monies from T/B’s and then don’t meet the obligation, therein ending up with you wrongfully appropriating someone’s funds under false pretense…
As it sounds that you are, attempt to settle this with the T/B and gain some form of a signed release from them… If you aren’t successful and they simply pursue you in civil court that isn’t any worse than the lender doing the same in fc… it is the criminal element that one should avoid if at all possible. Good luck here. If you post more details we could give more ideas… (all except for Jack, who has already delivered his std line…).
Posted by carribbe on November 30, 2008 at 24:59:10:
Can the tenants buy now? Can you lower the price to get it sold to them today? Can you short it to the tenants? Can the tenants pay more each month? (what have you done with the option and their rent each month) I don’t know your numbers but this may be a golden opportunity for the tenants if they can perform. Who knows, for the right price they may have someone who can come in and help them purchase the property. You may lose some money but gets you off the hook. Look at any and every option you can with the current tenant. Seems they are at least luke warm if they are currently doing a lease option with you.