Selling property......

[last2cents]

A friend of mine who's contemplating BK (and who's been picking my brain), asked me a question that I wasn't sure how to answer......so I thought I'd put it out here.

He owns some raw land (totally undeveloped - out in the middle of nowhere)....he's been making payments on it, but if he could sell it for the mortgage amount (around $50k), he might be able to avoid BK because of the elimination of the monthly payment.

His brother in law is willing to buy it from him for the amount of the note - the land itself is probably worth appraisal wise between 45K and 55k. If he sells to his BIL - for obviously market value, and then winds up having to file bk later - is this going to be looked at as preferential?

Or would it be ok because he gained nothing from the sale, and the entire sale price went to satisfying the underlying secured debt on the asset?

[AngelinaCatHub]

A friend of mine who's contemplating BK (and who's been picking my brain), asked me a question that I wasn't sure how to answer......so I thought I'd put it out here.

He owns some raw land (totally undeveloped - out in the middle of nowhere)....he's been making payments on it, but if he could sell it for the mortgage amount (around $50k), he might be able to avoid BK because of the elimination of the monthly payment.

His brother in law is willing to buy it from him for the amount of the note - the land itself is probably worth appraisal wise between 45K and 55k. If he sells to his BIL - for obviously market value, and then winds up having to file bk later - is this going to be looked at as preferential?

Or would it be ok because he gained nothing from the sale, and the entire sale price went to satisfying the underlying secured debt on the asset?

YES! on all counts. First, it is fair market value, second he is satisfying a creditor that was secured, and it won't matter if it was a BIL as it was fair market. In this market, the net amount is more than fair since everything is becoming devalued. Take it and run fast before BIL changes mind. 'Hub

[frogger]

Fair market value is the key here. If sold at FMV, there should be no problems.

[keptdigging]

Sometimes the law is logical: when you sell for FMV you haven't diminished a future possible BK estate or the position of any creditors. In this case, in fact, unsecured are made better off as a cash flow drain is removed.