I’ve written elsewhere about real estate bankruptcy and how to buy a home out of a bankruptcy. The purpose of this article is to share a true story about how a homeowner got hoodwinked into filing a bankruptcy, and it cost him his dream home. Bobby (not his real name) owned three homes. He had a successful career as the sales manager of a large organization, and he had done quite well, but he was laid off in the recession.
Real Estate Bankruptcy
He was in the middle of building his dream retirement home when he lost his job, so the construction came to a halt. His two rental homes went into foreclosure. All that he had worked for his whole life was at stake, and at 57 years old, it would be hard to start all over, especially in a recession. So he went to see a bankruptcy attorney, who promptly told him he must file a Chapter 7 bankruptcy, even though Bobby’s total debts were only $60,000 outside the real estate. So Bobby wrote the attorney a check and proceeded with what he thought was sage legal advice on this real estate bankruptcy.
Real Estate Bankruptcy – Bad Advice
Forward the calendar one year. Bobby’s two rental homes were foreclosed after the banks got relief from the automatic stay, and his dream home is being sold by the bankruptcy trustee, who under Federal law is in charge of all of Bobby’s assets, the sale of those assets, and the distribution of net proceeds. Bobby told me he has since gotten advice from wiser attorneys, who said he should never have filed bankruptcy. He could have let his two rental homes go into foreclosure, kept his retirement home and eventually finished it over time. But his dream home should not have been sucked into the black hole of bankruptcy under his circumstances, according to Bobby, in a real estate bankruptcy.
I was a real estate attorney for 20 years, so I can say this, “Be careful who you hire for professional advise.” In Bobby’s case, bad advise about a real estate bankruptcy cost Bobby and his wife their retirement home and arguably their future.
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