Seller carryback with a Chpt. 7 BK

[JoshDom1898]

What is the name of your state? AZ

Ok, so here's my question. I have a few thoughts but am interested in other's opinion (HomeGuru).

Seller sells home to buyer and seller does carryback financing.

Buyer executes a promissory note to Seller for the balance of Seller's loan to the lender.

Seller files Chpt. 7 BK.

How does it affect Buyer?

My thoughts, I think when Buyer and Seller execute the promissory note they have to provide the lender a copy, thus, when Seller files the BK. Buyer is bound to pay Seller for the loan payments via the promissory note. Since BK has a "stay" on litigation, how would this affect the Buyer? Or maybe Buyer should execute a separate promissory note to Lender or an assignment of sorts from Seller to Buyer.

 

[FarmerJ]

Josh If a property is sold via contract for deed ( payments made to seller rather than a mortgage firm ) and the actual contract for deed is recorded at the county govt center then the seller files BK there should be no problems for the buyer as long as the contract was properly recorded by the county recorders desk. THe BK trustee would see the monthly payments as income for the seller and the rest is none of the buyers concern. Did the buyer use the services of a atty to draw up a contract ?

 

[HomeGuru]

What is the name of your state? AZ

Ok, so here's my question. I have a few thoughts but am interested in other's opinion (HomeGuru).

Seller sells home to buyer and seller does carryback financing.

Buyer executes a promissory note to Seller for the balance of Seller's loan to the lender.

Seller files Chpt. 7 BK.

How does it affect Buyer?

My thoughts, I think when Buyer and Seller execute the promissory note they have to provide the lender a copy, thus, when Seller files the BK. Buyer is bound to pay Seller for the loan payments via the promissory note. Since BK has a "stay" on litigation, how would this affect the Buyer? Or maybe Buyer should execute a separate promissory note to Lender or an assignment of sorts from Seller to Buyer.

**A: you are confused. The Buyer has no relationship with the lender yet the Buyer is the one who will suffer the most. My opinion is to h ave the Buyer obtain financing (if possible) and this action would settle the mortgage problem.

 

[efflandt]

If the seller transfers their interest in collateral used for the mortgage and the lender finds out, the mortgage likely becomes immediately due and payble (read your loan papers). If not paid immediately, the lender could begin foreclosure, and the buyer would end up with nothing, except maybe a lawsuit against the seller.

So if you want to sell the home, do it properly, with the buyer obtaining their own financing to pay off your loan at closing. Any buyer who would do what you are proposing without a properly recorded deed or contract on a clear title would be foolish.

 

[HomeGuru]

If the seller transfers their interest in collateral used for the mortgage and the lender finds out, the mortgage likely becomes immediately due and payble (read your loan papers). If not paid immediately, the lender could begin foreclosure, and the buyer would end up with nothing, except maybe a lawsuit against the seller.

So if you want to sell the home, do it properly, with the buyer obtaining their own financing to pay off your loan at closing. Any buyer who would do what you are proposing without a properly recorded deed or contract on a clear title would be foolish.

**A: good advice.