Purchasing a home - seller in BK

My family was planning to purchase a home in NY and after signing purchase agreements, the owner acknowledged that they're in bankrupctcy. The trustee that they named is a Chapter 13 trustee, so we assume this is their type.

We previously knew nothing about BK, but have learned a little by reading materials. However, all of the materials that we've read deal with questions from the people in bankruptcy - in our case, the seller of the house, NOT the buyer (us).

What are some things we should look out for regarding the closing dates and dealing with a house owned by someone in Chapter 13? The original closing date that we wanted was pushed a week later by the BK owners of the house. Also, are there any potential problems with the BK process if we occupied the home prior to closing? (Like could the courts take the house away from us?)

Also, just found out that the owner has recently lost job - would they then be forced into Chapter 7? How would Chapter 7 affect our purchasing the home? We're trying to get answers from our realtor speaking with their realtor, but I thought it would be best to ask the experts in the group.

Thanks for your response - we REALLY appreciate it!

Your real estate agent should be able to protect your interest in this deal. First, you will need to make sure the trustee has approved the sale of the property. If the people you are purchasing it from have already filed BK, then they no longer are able to sell the property without the blessing of the trustee.

People buy properties in BK all the time. No need to be scared of it, but just make sure the trustee has approved the sale and is in the loop. Remember, the house is in the estate of the bankruptcy....the owners no longer control things. You certainly wouldn't want to buy something from the bk person, give them the money, and then find out it wasn't their property to sale!!!

Like Aa said, the house in the control of the Trustee. When a person files BK, their estate falls under the control of the Trustee. Basically the house is in the hands of the Court.

And as Aa said, a person in Ch 13 BK would need Court/Trustee's approval to put the house on the market for sale. So you'll want to make sure that is the case. That the people did indeed get the Trustee's approval to sell their house.

Beyond that, this should be a normal deal in all other ways for you. The BK is the seller's problem, not yours.

The seller loosing his job could impact their ability to sell to you if your closing date is set way out in the future. If you're closing soon, as in before their next scheduled Ch 13 plan payment is due, then your deal should go thru as planned.

If the sellers miss their plan payment due to job loss, then they risk their Ch 13 being dismissed. That means they loose the protection of the automatic stay and their Creditors will be on them hot and heavy.

If the sellers get into the position where they cannot make their payment to the Court, depending on if they are Old Law or New Law, they could convert to Ch 7 literally over night. In that case, Federal Law would trump you sales contract, and the sellers may not be able to proceed to closing as planned.

Personally, I would not move into that house, or take possession of it until the ink is dried on the paperwork and the docs are filed at the Court House. Once the Deed/Title is officially registered at the Court House, then the house is legally yours.