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LEGAL
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said Krohn. “The trustee is not a collection agent for the mortgage
company.”
The debtor still benefits by having the debt cleared, and no HOA dues
or other liens hanging over their heads. Lenders like bankruptcy short
sales because they have a court order approving the sale.
Krohn added that the buyer needs to be aware that a bankruptcy estate
short sale will be “as is” with no closing costs or home warranties, and
in addition to lender approval, court approval is required.
WHAT HAPPENS IF A PETITION IS FILED DURING ESCROW?
Like the listing agreement, a purchase agreement entered into by a
seller/debtor would be considered an executory contract that must be
accepted or rejected by the trustee. It is the same situation—the seller
can no longer convey the property post-petition, and the trustee must
take over and get court approval of the sale if the trustee accepts the
agreement.
“If a seller is already in escrow and it’s close to closing, let it close,” says Krohn.
“Otherwise, once the bankruptcy is filed, everything comes to a halt.”
Of course, the agent should also advise the seller to communicate fully
with their bankruptcy attorney as to the status of the listing or escrow,
to better prepare for filing the petition.
Because every situation is different, any time a seller files bankruptcy
and the property is already in escrow, the buyer’s agent should advise
the buyer to consult an attorney to determine the buyer’s rights and
any effects the bankruptcy will have on the purchase. n
Deanne Rymarowicz is GLVAR Legal Counsel. The information contained herein is not
intended to give legal advice or to address specific legal or ethical situations. Legal questions
should be directed to your legal counsel or the NVAR Legal Answerline at 1-800-748-6999.
CHAPTER 7 BASIC STEPS
EVERY CASE IS DIFFERENT; THIS IS A SIMPLIFIED VIEW OF AN OFTEN COMPLEX PROCESS.
THE AVERAGE CHAPTER 7 CASE TAKES FOUR MONTHS TO COMPLETE AFTER FILING.
1. Complete pre-petition
paperwork, information
gathering and coursework
2. File Petition Automatic
Stay!
3. Assign a Trustee
4. Hold the 341 Creditors
Meeting
5. Marshal and sell nonexempt
assets to pay debts
6. Discharge
7. Case closed
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SOUTHERN NEVADA REALTOR ® FEBRUARY 2013 www.LasVegasRealtor.com