Buying and Selling a Home: Bankruptcy

If the proposed seller either files for bankruptcy or is named in a petition for involuntary bankruptcy, control of the title to his real estate passes to the Bankruptcy Court and is subject to its disposition. Any foreclosures are automatically stayed until the trustee in bankruptcy decides whether to sell the property himself or allow the foreclosure to proceed.

If a purchaser acquires property from a seller who shortly thereafter goes bankrupt, the trustee may have the deal set aside the transaction was in payment of a disproportionate part of a debt owed to the buyer,

If a purchaser acquires property from a seller who shortly thereafter goes bankrupt, the bankruptcy trustee may have the deal set aside if inadequate consideration makes it a fraudulent conveyance

An individual can now hold as exempt from their creditors (other than mortgage holders) the person’s interest in one parcel of real estate they use as their residence up to equity value of $125,000. So if husband and wife own the property and both file bankruptcy, then $250,000 of equity (after taking into consideration any mortgages) is exempt from their creditors.