Question about lot of land on owner financing payment plan in Chapter 7 bankruptcy

[ScaredGuy]

Hi guys, since May of 2021 I have been making monthly payments on a lot of land via an owner financing contract. The sale price was $9,000 and I put $4,500 down. The remaining owed on the land is about $1,900. Would this lot of land be considered an asset even though I do not yet technically own it and still owe money on it? If so, how would that work? Would the trustee pay off the remaining $1,900 owed in the owner financing contract then sell it?

If this is indeed considered an asset in a Chapter 7 bankruptcy, what if I worked with the owner to write up a new contract to make my father the one who makes the remaining payments and gets the land put into his name when the contract is complete? Would this be a way to protect it or would it be considered a fraudulent conveyance?

Alternatively, what if I worked with the owner of the land to cancel the agreement/void the owner financing contract temporarily, thus preventing a trustee from paying it off and selling it, then restart it after the Chapter 7 bankruptcy case is complete?

Basically I'm trying to figure out if there's a way to protect this lot of land. One attorney suggested that I pay off the remaining balance then try to sell it prior to my bankruptcy case, but wondering if there's any other viable route to take. Thank you for any advice on this.

[despritfreya]

. . . since May of 2021 I have been making monthly payments on a lot of land via an owner financing contract. The sale price was $9,000 and I put $4,500 down. The remaining owed on the land is about $1,900. Would this lot of land be considered an asset. . .

YES - the land is an asset (schedule A/B) and the remaining amount owed on the loan is a deb (Schedule D). The financing of the purchase of property through an “Agreement of Sale” aka “Land Contract” is just another way to purchase real estate.

Would the trustee pay off the remaining $1,900 owed in the owner financing contract then sell it?

If there is no exemption to cover the asset, and there is value in the asset, the Trustee will assume the land contract, market and then sell the asset. Just like any other sale, the proceeds will pay off the loan and other necessary closing costs. The balance will be used to pay creditors.

. . . what if I worked with the owner to write up a new contract to make my father the one who makes the remaining payments and gets the land. . .Alternatively, what if I worked with the owner of the land to cancel the agreement/void the owner financing contract temporarily. . .

FRAUD, FRAUD, FRAUD so NO, NO, NO. If you want to protect a valuable asset that is not exempt DO NOT file a Chapter 7. Discuss your options with a local attorney.

Basically I'm trying to figure out if there's a way to protect this lot of land.

Don’t file Chapter 7.

Too many times debtors try to play games. The vast majority of the time they get caught.

Des.

[ScaredGuy]

despritfreya thank you for the information. What if my father purchased the land from me for fair market value? Would I need to use the funds from the sale to pay off creditors? Would this be a way to keep the asset?

[despritfreya]

despritfreya thank you for the information. What if my father purchased the land from me for fair market value? Would I need to use the funds from the sale to pay off creditors? Would this be a way to keep the asset?

I see nothing wrong with such a sale however, before going down that path you should get two or three appraisals.

Years ago I had a client who sold her home to her parents a few months before coming in to see me. Knowing that such a sale would be questioned, she was smart enough to get 3 appraisals. The sale price to her parents was the average of the 3. Trustee's attorney questioned the sale but once we showed her the paperwork behind the transaction, she was satisfied. What did my client do with the net proceeds? She downsized and purchased a smaller home - well within the allowed homestead exemption.

Des.

[ScaredGuy]

despritfreya good idea thanks. Also, I guess if the credit card that I'm using to pay for this lot reaches its limit and the payments no longer get made for this lot and thus the deal is cancelled by the owner, it would no longer be considered an asset for my case.

[despritfreya]

despritfreya good idea thanks. Also, I guess if the credit card that I'm using to pay for this lot reaches its limit and the payments no longer get made for this lot and thus the deal is cancelled by the owner, it would no longer be considered an asset for my case.

Depends upon state law. How is a land contract foreclosed? Until all strings under state law are broken, you have an interest in the property and therefore the property is an asset. You would need to check with someone in your state who knows how land contracts are terminated.

Des.