Will a court enforcea contract of sale with seller who is in bankruptcy?
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Will a court enforcea contract of sale with seller who is in bankruptcy?
I am buying a house (not foreclosure or short sale). We signed all closing documents and at the last minute, seller refused to close saying she disagreed with the payoff amount and would now owe money to the mortgage company. Seller is in Chapter 13 bankruptcy and the bankruptcy court already approved the sale price and selling of the house. We have a court date to force the sale since she is in breach of contract- will the court force her to comply with the contract or is there some protection given to her since she is in bankruptcy?
Asked on November 12, 2010 under Bankruptcy Law, New Jersey
Answers:
M.T.G., Member, New York Bar / FreeAdvice Contributing Attorney
Answered 14 years ago | Contributor
The reason she is upset is because a Chapter 13 does not wipe out debt, it only restructures it. The seller was foolish in not checking the numbers before hand. She has a deficiency and the mortgage company can go after her for that money. If the debt is not listed on the Chapter 13 bankruptcy (and from what I can tell from your question it appears that it may not be) then it may be possible for her to add it, but she may then not be able to repay it. The protections she is afforded are for those debts listed. The suit that you are bringing is known as "specific performance" of a contract. It is generally used in house sales as real property is considered "unique" and therefore monetary compensation can not make the buyer "whole." Maybe she can negotiate the deficiency. That should be suggested. Good luck.
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