How to Buy a House From a Bankruptcy Court

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Most individuals who file for bankruptcy protection have very few assets. Any assets that debtors own are usually protected by exemption laws. Occasionally, a debtor has more property than can be exempted in bankruptcy, and that property will be auctioned or sold by a bankruptcy trustee. Most houses or other types of real property are sold via auction in the bankruptcy courtroom. Purchasing a house through a bankruptcy court often permits you to obtain the house at a substantial discount.

  • Find a bankruptcy courthouse auction. Many bankruptcy trustees publicly announce auctions in the classified sections of newspapers and other public mediums. Contact your local bankruptcy court and ask whether any auctions have been scheduled.

  • Appear at the bankruptcy court on the day of the auction. Wait for the bankruptcy judge to call the case and announce the auction. The bankruptcy judge will act as the auctioneer.

  • Bid on the house by announcing to the judge your bid. Usually, the judge will establish minimum increments of bidding -- for example, $15,000. The winner is the highest bidder. Oftentimes, very few people appear at bankruptcy auctions; therefore, you may have an excellent chance to win the auction.

  • Pay the bankruptcy trustee for the house in cash or cashier's check. The trustee may permit you to pay by regular check. You may not finance the purchase of an auctioned bankruptcy house with a loan -- you must pay in cash.

Tips & Warnings

  • This article does not constitute legal advice. See an attorney.

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References

  • "Bankruptcy and Debtor/Creditor Examples and Explanations"; Brian A. Blum; 2010
  • "West's Bankruptcy Code, Rules and Forms"; Thomson West; 2010
  • "Collier on Bankruptcy"; Alan N. Resnick, Henry J. Sommer; 2010
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