Seller and their attorney did not disclose they filed for bankruptcy (for sale by owner, real estate)

[momfabs32]

We are supposed to close on a house tomorrow and we found out 5 days ago that the seller filed for bankruptcy before they even listed the house for sale and neither they or their attorney disclosed this on the purchase and sale. They are now saying the closing will be delayed indefinitely. We have movers coming tomorrow, mail being delivered etc. Do we have any recourse against the seller and their attorney? Our attorney asked for a use and occupancy permit so that we can move in the house as planned but the seller said no because we were going to do work inside the house but the only thing we were going to do is replace the furnace which we already bought and they knew that - they are heating the downstairs with kitchen oven!!
I am fit to be tied and not sure where or who to turn to at this point hoping someone might have some good advice.

[luv my dayton]

Thought there was some deed search or something that a buyers lender does to see if any legal problems may be hidden. Did you have your own realtor or was this a for sale by owner? Good luck with this illegally done sale. I would get a real estate attorney to advise you as this whole thing was done by deception and someone owes you.

[Dm84]

Your lawyer needs to deal with this. At a minimum you'll get back whatever money you paid already, but hopefully you can get damages as well.

[CaseyB]

What does your attorney say? The seller's attorney may not have known this when he prepared the P & S.

You can go to the bankruptcy court and they can order the house sold, but it could take a while. I wouldn't expect any damages will be awarded.

[MikePRU]

Originally Posted by luv my dayton

Thought there was some deed search or something that a buyers lender does to see if any legal problems may be hidden.

Typically, the closing attorney does a title search on the property as a part of the loan approval process. I'm not an attorney, but I don't believe when a bankruptcy is filed that anything would be recorded against the house. So, a title search would not have uncovered a bankruptcy to the best of my knowledge. A credit check would show a bankruptcy and there are ways to search the bankruptcy court records, but I'm don't believe either of these would be common practice.

Originally Posted by CaseyB

What does your attorney say? The seller's attorney may not have known this when he prepared the P & S.

You can go to the bankruptcy court and they can order the house sold, but it could take a while. I wouldn't expect any damages will be awarded.

I agree. It's attorney time. Read over your P&S as well. I believe it's a standard clause that the seller warrants no pending legal action or bankruptcies. If they signed a contract stating they were not in the middle of a court proceeding and they are then that would be gross misrepresentation and likely grounds for a lawsuit. Again, I'm not an attorney these are only my layperson's opinion so make sure to speak with a qualified attorney.

[sal1181]

definitely consult your attorney and hopefully you are using a Real Estate attorney. Seller would have to give you all the money back plus pay for any damages.

[traffic_lover]

**this is not legal advice**
This seller bankruptcy situation happened to me. I was buyer. Seller was filing bankruptcy concurrently with sale. Bit it was disclosed pre-P&S. The sale had to be approved by bankruptcy trustee, which happened no problem. Nothing was delayed by the bankruptcy proceedings.

MY ADVICE: get the bankruptcy court date ASAP as this will be what gates the deal. The sale should be approved as a matter of course as creditors WANT all assetts liquidized.

This situation is pretty common. In MA bankruptcy, homestead act protects seller proceeds to large extent in from unsecured creditors. In other words, homestead act let's seller keep more of liquidated equity from sale than would otherwise be granted under federal law.
**again, ask your lawyer about this. This is not legal advice***

[momfabs32]

Thanks for all the replies! We do have a real estate attorney but he is not getting any where with the sellers attorney or their broker. The closing date has been extended another 30 days however, the lien on the title has still not been released and have no information from the sellers broker or there attorney on when that might be.The sellers agreed to pay us $5000.00 in damages WHEN we close but only if we signed an indemnification. I prefer to walkaway from this deal as the seller their attorney and their broker are dishonest human beings and have no regard and/or consideration for others. We are packed and ready to move and if we don't close by the end of the month we will have to go to a hotel... I'm extremely frustrated.