The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005
The 2005 Bankruptcy Reform laws have placed time-frame restrictions on filing bankruptcy to avoid mortgage foreclosure. The "automatic stay" provision requires that an individual looking to file for protection from his/ her creditors has to receive "credit counseling" for a period of 180 days prior to filing for Chapter 7 or Chapter 13 bankruptcy. There is a “means test” to determine whether a consumer/debtor is eligible for chapter 7 (liquidation) or must file under chapter 13 (wage-earner repayment plan). The debtor's attorney will explain the process to the consumer and give his or her client/debtor a legal opinion regarding which forms to file with the court once the circumstances of a debtor's situation has been reviewed.
People, please do not let anyone other than your attorney tell you what bankruptcy forms to select. Bankruptcy is complicated. The chapters have different bundles of rights...
Agents representing clients during this time would do well to remember that lenders will continue to pursue collection efforts while the potential seller(s) works with his/her/their attorney. If the foreclosure date is scheduled prior to the end of the 180 days, there is a distinct possibility that a homeowner might not be able to file for bankruptcy protection before selling his or her home. This means that agents must keep in mind that the seller may lose the home."May" being the operative word here... Again, the debtor must confer with his/her/their attorney regarding the best cause of action to take and for an explanation of the process. Real estate agents are not the correct venue for these types of questions but debtors must bring their listing agents into the loop if they do file.
We represent you. If you do not tell us the truth we can't do an efficient and effective job (there are time constraints involved in foreclosures and bankruptcies). We lay out money up front to advertise and market your property. We have professional associations and network to promote your best interests. Not being honest with the professional you retain is never a good idea...
I write this because as a buyer's agent I routinely ask if the seller of a distressed property is considering bankruptcy before I write an offer. Some listing brokers feel this is none of my business. I do not agree. It is my business to represent the best interests of my buyer. A bankruptcy filing during or immediately after good faith negotiations that results in an accepted binder can materially affect the sales transaction.
Anything that is a material fact that can potentially stop my buyer(s) from getting his/her/their dream home should be disclosed. Here's a little recreational reading you may find very useful. Time to get back to vacationing with the wee people... :-)
http://www.uscourts.gov/FederalCourts/Bankruptcy/BankruptcyResources.aspx
http://www.justice.gov/ust/eo/bapcpa/index.htm
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