Posted by JohnBoy on July 20, 2001 at 12:12:46:
Depending on how much time passes from when he sells to you vs when files BK and how much equity is in the property, the BK Court could recind the sale and take the property back and order it sold to pay any creditors owed from the proceeds of the sale.
The lender “could” call the loan due and if they do, they would still have to go through the foreclosure process to get the property back.
The question is, IF, the lender did foreclose, what could you do? Can you qualify to refinance if you had to? Could get your tenant/buyer refinanced if you had to? Could you sell the property out right if you had to? These would be some of your options to deal with it if it were to become a problem. Depending on how long it takes to foreclose and get the property back in your state will determine how much time you have to deal with the problem.
In my state it can take 9 months to a year with no problems and in some cases drag out for two years. So in my state it would be a matter of whether I could accomplish any of those options within a 9 - 12 month period before the lender can get the property back.
The other issue the lender would need to decide is if the payments are being made on time every month, even though it’s from someone other than the borrower, is it worth going through a foreclosure and screwing up a perfectly good loan that is being paid on time???