When purchasing property, most buyers assume that the property got foreclosed, or the bank owns it. However, they do not think the property could be part of a bankruptcy. If you are looking to get such property, you need to understand the unique challenges they offer. Also, you need to know that they fall under different sets of rules.
If you still want to go ahead and buy the property, there are several things you should know. For instance, the massive difference that exists between chapter 13 and chapter 7 bankruptcy. If you are buying a home from an owner who filed for chapter 13 bankruptcy, you will only deal with them throughout the purchase process.
These properties often remain under the buyer’s control. However, the courts will need to approve your offer before you pay. It ensures that the owner is not receiving any proceeds and that the creditors get protected in the sale.
According to the US courts, chapter 7 bankruptcy, it is entirely different. When one files the bankruptcy claim, all their assets get taken by a court-appointed trustee. This trustee will negotiate and make sales on behalf of the owner.
You will have to sign a bankruptcy contract that is somewhat similar to the real estate contract but has numerous specific bankruptcy terms. Once you agree on price and conditions, you will have to wait for a court hearing that will have a judge review the terms. If it is approved, the contract becomes valid.
You must know that until courts approve the offers, the trustee has the right to accept other higher offers.