Subject to vs. Chapter 7 Bankruptcy - Posted by Chris Hall

Posted by Rick W. on March 08, 2000 at 04:33:09:

I have taken several properties into Trust, subject to the existing mortgage, and had the sellers file both chapter 7 or chapter 13. At first, it made me nervous as a cat, but it ultimately worked out ok.

Put yourself into the position of the mortgage company. The are looking at the prospects of not receiving any payments for a long while (under chapter 13), or getting the property sold at possibly less than loan value under chapter 7. They are typically VERY cooperative.

We had the Bankruptcy Trustee, the seller’s Attorney, and the mortgage company agree to allow the house to be set aside from the filing. It seemed to be important that everyone knew what was happening, because I was told that any conveyance within a certain timeframe (either 6 months or a year, I don’t remember which) done before or after the filing could be overturned by the court.

With everyone agreeing on the transaction, and the mortgage company seeing that someone is in place to continue making payments, it worked out well. The mortgage is no longer an issue, and that’s usually the largest debt of them all. Now the sellers’s financial picture looks totally different, and the need for bankruptcy may not be as great.

It DOES take participants willing to look at the situation with an open mind. To find an Attorney, a mortgage company, and a federal employee with that capacity may not always happen, but it has in my case because I was able to present the advantages to each party.


Rick W.

Subject to vs. Chapter 7 Bankruptcy - Posted by Chris Hall

Posted by Chris Hall on March 07, 2000 at 22:46:59:

If I am doing a “subject to” deal with a guy, my trust gets the deed and the house, he has the note in his and his exwifes name, & I am making payments with my buyer. So far so good. What happens if this guy is in process of filing Chap 7? Can he exempt this note in his bankruptcy filing? Or any other options in this case?

The reason I ask is the property is in husband and exwife name. He wants to rid the debt burden from his exwife so she is good to go to raise their children.