QUESTION
Can we file for bankruptcy and what will happen after we file?
Asked on Aug 03rd, 2014 on Bankruptcy - South Carolina
More details to this question:
We own a house that we are selling to my son on land contract. We can no longer afford the payments as both my husband and I are retired. We are in a financial bind and would like to file bankruptcy. Can we do this while still having the deed to the house? Would we be forced to remove my son from the home? He has done a considerable amount of work remodeling the house and we do not want to kick him out. Is it possible to file bankruptcy under these conditions? Please help us.
11 ANSWERS
The devil is always going to be in the details. While you can file bankruptcy if you are eligible to do so, this contract will be a bump in the road that could result in questions being asked about this transaction. It is impossible to speculate about the outcome of this transaction.
Answered on Aug 12th, 2014 at 4:49 PM
If you file a chapter 7 bankruptcy, the chapter 7 trustee will have the right to collect payments from your son or sell the land contract. You should take the land contract to a bankruptcy attorney for review and discussion.
Answered on Aug 08th, 2014 at 9:24 AM
2 Awards
land sales contracts are treated like mortgages in a bankruptcy proceeding. However it sounds like you are the seller/mortgagee. Pursuant to 11 U.S.C. 704(a)(1) (collect and reduce to money the property of the estate), the trustee can sell any property that isn't exempted pursuant to 11 U.S.C. 522. However, please note the following: 11 U.S.C. 365(i)(1): If the trustee rejects an executory contract of the debtor for the sale of real property . . . under which the purchaser is in possession, such purchaser may treat such contract as terminated or . . . may remain in possession of such real property. 11 U.S.C. 365(i)(2): If such purchaser remains in possession . . . such purchaser shall continue to make all payments due under such contract . . . and the trustee shall deliver title to such purchaser in accordance with the provisions of such contract but is relieved of all other obligations to perform under such contract. So it sounds like the son is already in possession of the home. Accordingly, pursuant to 11 U.S.C. 365(i), he may stay in the home and continue to make payments even if the executory contract is rejected by the trustee. However, the trustee may be able to assign you right to the
Answered on Aug 07th, 2014 at 2:43 AM
Commercial & Bankruptcy Law Attorney serving Powell, OH
at
Ronald K. Nims
Update Your Profile
As long as the land contract was a valid and enforceable legal transaction (for example, the deal isn't a disguised gift, where the price is absurdly low for the property or you didn't properly execute a land contract and record it), then the trustee can't take the house away from your son. However, there is a question of whether the land contract has a value in excess of the mortgage. If the land contract is merely a conduit for payments on your mortgage from your son to the bank, then you have no equity in the land contract but if the payments are greater than the amount of the mortgage, then this equity is an asset of the bankruptcy estate and the trustee might attempt to convert it into cash to pay his legal fees and your creditors.
Answered on Aug 05th, 2014 at 10:43 PM
When you file for a Chapter 7 bankruptcy, you surrender all your "non-exempt assets" to the bankruptcy trustee. You would not be allowed to claim the homestead exemption for the house you are selling to your son unless you are actually living there too. It is an asset from the trustee's point of view, so if you want your son to stay in the house, you would have to convince the trustee that the land contract is the best possible use of the house. If your son is allowed to stay in the house, the trustee is likely to claim your son's payments on the contract and may choose not to pay the mortgagee. You would essentially have no say in what happens to the house. It is still your choice whether to file bankruptcy or not, but it is extremely difficult to back out once you have filed a Chapter 7. Therefore, you are wise to investigate the implications before filing. You might want to consider alternatives such as your son assuming your mortgage, so you would be relieved of the payments and he could stay in the house.
Answered on Aug 05th, 2014 at 10:41 PM
The house is still yours and you would have to include either its value or the money received as assets in bankruptcy. You would have to figure out the best way to exempt your assets in a potential case based on the value of the equity and your other assets.
Answered on Aug 05th, 2014 at 1:11 PM
Domestic Law Attorney serving Vista, CA
at
Ralph L. Williams
Update Your Profile
The monies due under the land sale contract would have to be included as an asset in a bankruptcy which you may possibly claim as exempt if under the amount of $25,575.00 as provided in Code of Civil Procedure Section 703.140(b)(1). If you file the bankruptcy before any sale or transfer you could claim a homestead exemption of up to $175,000.00 under Code of Civil Procedure Section 704.730 (3) if either spouse is age 65 or older or physically disabled.
Answered on Aug 05th, 2014 at 11:14 AM
Bankruptcy Attorney serving Walnut Creek, CA
at
Alan E. Ramos Law Offices
Update Your Profile
You haven't provided enough information to answer the question accurately. Depending on the facts, the sale could be set aside by the bankruptcy trustee after you file your bankruptcy petition. You should see an attorney before you enter into any contract of sale with your son.
Answered on Aug 05th, 2014 at 9:46 AM
Bankruptcy Attorney serving Livonia, MI
at
Charles J. Schneider, P.C.
Update Your Profile
These questions are far too involved to answer by email and require much more information than provided. I suggest that you do not transfer any real estate before speaking to an attorney, especially a relative. A free initial consultation is offered.
Answered on Aug 05th, 2014 at 9:38 AM
Appellate Attorney serving Grosse Pointe Farms, MI
at
Musilli Brennan Associates, PLLC
Update Your Profile
The land contract is an asset and there is a good chance you son will be making his payments to the trustee in bankruptcy. Call an attorney and get counsel before you make a decision.
Answered on Aug 05th, 2014 at 9:08 AM
Bankruptcy Attorney serving Charleston, SC
at
Davis Law Firm
Update Your Profile
It is possible that you can file bankruptcy. However, you may not need to file. You need to meet with an attorney and bring all of your bills and discuss the situation with someone who understands what they are doing. Your son has an equitable interest in the property and the Trustee may honor that interest. A lot will depend on how much money and time your son has put into the property. The present value of the property and the amount of any mortgage on the property will also have a significant impact on this issue. Before you see an attorney, get an honest estimate as to what the property would sell for from a real estate agent or even better, an appraiser.
Answered on Aug 05th, 2014 at 9:07 AM