Posted by John Merchant on June 16, 2008 at 22:40:41:
Once you enter into a written agreement to make those payments nothing he could do would eliminate YOUR legal obligation to make your payments.
Furthermore, let’s say he does sometime in the future file a Ch 7 or 13 and does eliminate the debt…that’s NOT going to eliminate the mortgage or lien against the property as these aren’t discharged by BK filings and must be paid as as agreed to ever get released.
Any default on your part in making his payments as you agree when buying “subject to” could possibly be prosecuted as “equity skimming”, a felony in many states now.
What would happen if I purchase a house “subject to” to live in myself, and for example it may take 5 years for me to re-finance the mortgage if I can. What would happen if the original person who took out the mortgage went bankrupt during that time . Would I lose all the money I put into the house up to that point?
that if the transfer of deed occurred just before the BK, then it may be viewed by the court as a fraudulent transfer, on that would remove assets that should be used for paying off the debt.
Posted by John Merchant on June 15, 2008 at 11:15:20:
If you take a deed now, then make the payments on the loan as they fall due, although the loan would still be in seller’s name t time he filed BK, my guess is you’d be unaffected by his BK.
While the seller would have to list the bank loan on the BK schedule of debts, so long as it’s current it’s really not going to be a concern of the BK trustee…and with YOUR having the deed, the equity in the house would be yours, not the seller’s so T’ee couldn’t use the house equity for any purpose.
Thanks for the comment. I was more concerned with paying into the property for 2-3 years and all of a sudden the holder of the orignal debt decides to go chapter 7 and wipe out all his debts.