Homes purchased that are part of a bankruptcy can present unique challenges. There are also different types of bankruptcy which can make the transaction even more complex. 

Under Chapters 7 and 11, the trustee is the appointed seller of the home.  In most other cases, the owner is the proper seller.  In either case, a court order authorizing the sale is typically required.   When a home is part of a bankruptcy, it is likely to have other liens and debts attached to it.  Did you know that eliminating a debt does not eliminate a lien?   Once there’s a lien on the property, the lien must be removed in addition to any debt being eliminated. 

When the property’s trustee accepts an offer, all of the lienholders will be notified and they will be given a chance to review the offer. You can see that there are major challenges that come along with buying real estate in bankruptcy. It’s important to know that title insurance can help to avoid a huge headache by checking the liens and insuring that, as a purchaser, you will not be stuck paying for a property that has several liens on it.