How to Buy Distressed Properties After a Bankruptcy

Purchasing distressed property after a bankruptcy filing is often a very economical endeavor. Property that is sold during or subsequent to a bankruptcy is frequently sold at a substantial discount. The two major avenues to the sale of distressed property in bankruptcy are the bankruptcy trustee's auction and foreclosure sale. You should keep yourself apprised of the events in the bankruptcy case in order to properly position yourself to take advantage of a distressed property sale.

Instructions

1. File a "Request for Special Notice" with the bankruptcy court where the case is pending. The Request for Special Notice is a written document that includes your name and address, and indicates that you wish to receive copies of all documents filed in the case. A Request for Special Notice is crucial to keeping yourself informed as to any critical events in the case. The document may be filed with the clerk of the bankruptcy court for free.

2. Contact the bankruptcy trustee and ask whether he intends to auction any property of the debtor's bankruptcy estate. The bankruptcy trustee will be able to sell the property if the debtor could not claim sufficient statutory exemptions to protect the property. If an auction will be conducted, ask the trustee whether the property will be sold free and clear of any liens. You must be wary of purchasing distressed property that is taken subject to liens, as you will be liable to pay off the liens.

3. Attend the auction of the distressed property. Oftentimes, the auction takes place in the bankruptcy court. You must bid on the property in increments set by the court. If you are the winner, you must make payment arrangements with the trustee.

4. Contact the foreclosure agent of the distressed property if the bankruptcy trustee is not selling the property. The foreclosure agent may be willing to work with you to sell the property without conducting a public sale. If the agent still wishes to conduct a public sale, attend the sale, which usually occurs on the steps of the county courthouse. Similar to the bankruptcy auction, you must bid on the property.

Tips & Warnings

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

References

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