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My parents’ house is paid for and my three sisters and I are selling it, since we inherited it when my parents died. One of my sisters had to take personal bankruptcy and listed her part of the house as an asset. We have an offer on the house and are wondering if the bankruptcy will effect the closing on the house in any way. The buyers want to close in four weeks.

5 Thoughts on How do you sell a house when one heir is in bankruptcy?
  1. Reply
    Pedro ST
    August 30, 2011 at 7:06 am

    You need approval of those who have claims on your sister’s assets to sell the house. Unless you are selling for a very small price they will probably agree with the deal because it’s their best hope of getting some of their money back.

  2. Reply
    August 30, 2011 at 7:34 am

    why not ask your sister to ask her bankruptcy attorney how this will work?

    To me this is a convoluted question since in some states if a person “owns” a home then they can keep it in a bankruptcy, but since in this situation it is an asset and she’s claiming bankruptcy well your assets have to be sold in a bankruptcy to pay your bills and that’s a Chapter 13 repayment type of bankruptcy. If she’s claiming a Chapter 7 then somethings wrong because in a Chapter 7 she can’t keep that asset or the judge won’t let her claim a Chapter 7. that’s why i said she needs to ask her attorney where she stands (what the judge will determine…because there is a law these days that a judge will send all Chapter 7’s to mediation so that they will be changed to a Chapter 13 and repayments to their debts be made. In that case she’s depending on the money from the sale of the house to help her pay her bills in the Chapter 13 and is probably looking for that house to be sold quickly so she can get her money from it.

    Unless she owed over $ 65,000 and lots of medical bills she should not have filed for bankruptcy.

  3. Reply
    Mr Blunt
    August 30, 2011 at 8:05 am

    Short answer: I see no problem at all.

    Presumably, a solicitor will act on your behalf regarding the sale, in order to handle all the necessary legal stuff that ensures a safe and tidy exchange of cash and property.

    You could ask the lawyer this question. They might instantly say “No problem” or it might be the very act of asking that makes things more complicated for you.

    Also, any extraordinary news coming to the ears of a potential buyer might make them unnecessarily wary. Why worry them without need? IF the bankruptcy IS an issue then it’s exactly the type of thing the buyer’s lawyers look for and they will do so. Under those circumstances, the lawyers can add whatever contractual clauses might be needed to clarify the situation and make everyone happy – at the time when the buyers are part-way through the process!

    I suggest your sister’s creditors have no say in the dealings of the house, other than that which is merely potential and would be pro-selling anyway! They would like nothing more than for the house to be sold because that’s the route via which they may receive some cash due. Their only issue would be if they had reason to suppose that the house was sold significantly under-value, perhaps as an attempt to deny them their dues via your sister. For example, someone might sell such as house on paper for one amount (to avoid obligations) whilst receiving a further payment in secret.

    I would let everyone get on with the sale, promptly, and divide the proceeds accordingly and appropriately. At that point, the house will have a NEW owner, and your bankrupt sister will “have” a share of the resulting cash to take into account in the bigger picture that affects her alone.

    Good luck.

  4. Reply
    August 30, 2011 at 8:36 am

    You need to have the Bankruptcy Trustee appraised of the sale. They did not put a lien on the house

  5. Reply
    August 30, 2011 at 9:22 am

    The trustee of the bankruptcy must approve the sale. Her share of the proceeds must be given to the trustee. As long as the offer is reasonable, it should not delay the sale If you have a good Realtor, they should have not trouble showing the trustee the offer is fair.

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