Buying a House from Sellers in Chapter 13

Anonymous · ‎02-28-2021

Good Morning,

I'm in the process of purchasing a home and we found out via title a week before closing that the sellers are in Chapter 13, which had not previously been disclosed.

Initially we were told there is an exemption in the state of OK, and a judge would just have to sign off after a waiting period.

I've been following the case online, and last Thursday a voluntary dismissal was requested on behalf of the sellers.

We aren't getting a ton of communication on the process, but we were told a dismissal was the quickest route to free the sellers from the plan, then allow for the sale to proceed.

My question - Has anyone here been involved in a similiar situation, and potentially have some insight on the process?

We sold our house in another state, then had to get a AirBNB in the same school district as the home so our kids could get enrolled back in shcool, so we are staying cautiously optimistic that this can be cleared up on their end without a ton of delays. This was an out of state purchase and everything was in motion before this news dropped, so we are a bit stuck at the moment.

(First time post - I found the forum via searches on the topic, but didn't find any threads from a buyers perspective)

despritfreya · ‎02-28-2021

Several comments:

1. There is no prohibition to selling a home owned by a debtor in a Chapter 13.

2. The sale of a home while in Chapter 13 usually requires the filing of a Motion to Authorize the Sale pursuant to 11 USC §363 and a Court Order approving the sale after notice and a hearing. This is not a big deal, and I am not sure why these homeowners did not go in this direction.

3. A sale under Section 363 is akin to an auction sale and is subject to higher and better offers. However, it is very unlikely that someone would bid at the Hearing. 99% of the time, the final purchaser of a residential property remains the buyer who submitted the first sale contract - such as yourself.

4. If the Chapter 13 Plan was confirmed then maybe only the approval of the trustee would be necessary. This depends upon local procedure and, again, should not be a big deal.

5. Dismissing the Chapter 13 to allow the sale to proceed without a Court Order (or trustee approval) is also a way to handle this but, as it relates to the debtor, may have consequences for the debtor. Such is not your problem.

If you really want the home I would suggest having a bit more patience. You should be able to close your deal inside or outside the context of the Chapter 13 so long as the purchase price clears all recorded liens against the property.

Des.

Anonymous · ‎02-28-2021

Thanks for the reply and details!

The sellers are elderly and supposedly assumed the sale was no big deal, and did not need to be disclosed because of state homestead exemptions.

We had a set closing date for the 16th of February , and a reset for the 8th of March, but it appears the date will likely be adjusted again.

The original plan was to have a judge sign off on the sale, but now there was a dismissal filed by the sellers. My assumption was there were delays on plan one, so they are taking that route instead.

mich800 · ‎03-01-2021

@Anonymous wrote:
Thanks for the reply and details!

The sellers are elderly and supposedly assumed the sale was no big deal, and did not need to be disclosed because of state homestead exemptions.

We had a set closing date for the 16th of February , and a reset for the 8th of March, but it appears the date will likely be adjusted again.

The original plan was to have a judge sign off on the sale, but now there was a dismissal filed by the sellers. My assumption was there were delays on plan one, so they are taking that route instead.

The only snafu now may be if they have a mortgage and it is higher than the selling price. But I am sure that has been flushed out into the open by now.