Courtesy of Chicago Title.
Seller in Bankruptcy
1. Insuring a Sale of property where the seller has filed bankruptcy, requires one of the following:
- The bankruptcy case is closed, or
- The bankruptcy case is dismissed (that's "dismissed", not "discharged"), or
- The court file shows the property is exempt (residence only), BEWARE: In a Chapter 13 case, the residence is usually included in the debtor's "Plan", even if it is exempt.
- The property is abandoned by the court or the trustee, or
- A court order authorizes the sale, and the 14-day appeal period has expired. (In a Chapter 11, an Order Confirming the Plan will re-vest title in the debtor.)
A discharge of debtor does not release the property from the bankruptcy.
A motion for relief from the automatic stay only allows the foreclosing lender to proceed with foreclosure. It does not allow the bankrupt borrower to move forward with a sale of the property.
Documents needed to analyze bankruptcy questions:
- Bankruptcy petition
- Schedules (usually attached to the petition)
- Docket (i.e. a list of all documents filed in the bankruptcy case)
- Plan (Chapter 11 and 13)
2. Eliminating a judgement lien against the seller is an entirely separate matter.
To eliminate a judgement lien, we need to:
- Record a certified copy of a court order avoiding the lien (usually under the Bankruptcy Code Section S22(f)).
3. Eliminating federal and state tax liens is next to impossible.
Also, do not rely on a bankruptcy order purporting to set aside property taxes.
Want to learn more? Give us a call at 562.726.4056.