Foreclosure and Bankruptcy

[dennisbell]

What is the name of your state? MASSACHUSETTS

I tried to help my sister, Debbie, out of a pending foreclosure, due to go to auction in just 5 days. She owes about $13,000 in monies due, plus there are IRS liens, State income tax liens, etc.

I offered to pay the $13,000 and we agreed that she would Quit Claim the property to me. Previously, she had consulted with a bankruptcy attorney and I don't know what transpired between them, but when she told him that she was Quit Claiming the property to me for a consideration of $5,000, he said if she were to receive that $5,000, he would have to seize it for the creditors.

Today we were supposed to go to the attorney for the bank in order to pay all the arrearge, $13,000, which would bring her current. We agreed that she would move out and I would pay to help her with moving expenses, etc

However, the Bankruptcy attorney told her that the Quit Claim Deed would be a fraudulant conveyance and she should not sign it. Is this true?

In the meanwhile, instead of my paying off the arrearage as we had agreed, I left Debbie at the bankruptcy lawyers office, her crying every second. I haven't accepted her phone calls. Is it over as far as saving her from foreclosure?

PS: The bankruptcy attorney stated to me that the Trustee would inform me if I wanted to buy the property after the bankruptcy is filed, he would entertain my offer. I don't what that means? Is he being sneaky?

 

[Ladynred]

the Bankruptcy attorney told her that the Quit Claim Deed would be a fraudulant conveyance and she should not sign it. Is this true?

Yes, its true. Any transfers of property are examined for up to 1 year prior to the bankrutpcy filing date. If the Trustee thinks there's something fishy, he/she can go back up to 5 years. So it would NOT be a good idea for her to quit-claim the house to you for a mere $5000. If you BOUGHT it from her for fair market value, it would not be as big a deal, at least it would be reasonable. You are also considered to be an 'insider' (relative), so transfers to insiders would be scrutinized in any case.

PS: The bankruptcy attorney stated to me that the Trustee would inform me if I wanted to buy the property after the bankruptcy is filed, he would entertain my offer. I don't what that means? Is he being sneaky?

No, he's not being sneaky at all. If the Trustee were to seize the property due to fraudulent conveyance, his aim would be to sell the property as quickly as possible. If you were to make an offer on the house to the Trustee, it would be considered just like any other offer to buy.

Because the mortgage is in arrears, you sister CAN file for CH 13 rather than going for a Ch 7. If she can afford to make the payments at all that is. The arrearage would be included in the CH 13 payback plan and she'd still have to make the regular payments. It sounds like she's having trouble making the house payments, but a good lawyer may be able to do what they call a 'cramdown' - she needs to ask.

 

[giggle50]

Quit messing around with trying to bring the mortgage current and file chapter 13 bankruptcy. As the previous poster discussed, chapter 13 will stop the foreclosure immediately and allow your sister to develop a payment plan over the course of 36 to 60 months. The plan will include the back mortgage payments and tax liens spread out over time.

Chapter 13 stops foreclosure immediately, so does chapter 7 but you will not be able to prepare a repayment plan in a 7.

 

[dennisbell]

Chapter 7 Or 13 Now Or Later?

Here's the problem, guys - my sister "aint got no money" and there aren't any prospects of getting any either. She's mentally distressed and has had a few meltdowns over this entire procedure. She walked out of the Bankruptcy attorney's office yesterday and didn't sign anything. We're back to Square #1

She still wants to Quit Claim the property to me. However, she is so messed up, I'm afraid if I paid up the $13,000 she owes in arrears after she Quit Claims the property to me, she'll STILL file bankruptcy down the road when the creditors haunt and taunt her. Then upon investigation the Bankruptcy Trustee will set that property conveyance aside as fraudelent and I would be S.O.L. (and I don't mean Statue of Limitations). Right?

 

[Ladynred]

So, she's going to have to let go of the house. Since she has no money to fund a Ch 13 plan, her only choice is a Ch 7. It will stop the forclosure temporarily, but the bank will file for a Relief from Stay and continue with the foreclosure. She can't afford the house and she can't quit-claim it to you now. With the change in the BK laws imminent, she may not 'qualify' for a Ch 7 and Ch 13 would put her in financial chains for FIVE years.

She needs to just let go of the house and get a place she CAN afford, and get out from under her other debts if they are too much for her to handle. I can appreciate the agony of losing the house -been there, done that - but there comes a time when you have to face the fact that you just can't do it.. and let it go.

 

[bigun]

The best way you can help your sister is to encourage her to go through with the Chapter 7 and then help her find a place to live post bk. If you need to front her some money for deposits and a few months rent then, do so. Nothing wrong with family helping family but the way the situation is described, that $13K is gonna be lost forever.
She just needs to grow up and cut her losses.