What every realtor should know about bankruptcy.

I recently received a phone call from a realtor.  They were representing one of my clients whom had filed for Chapter 7 Bankruptcy.  This client had contacted the realtor to list their home for short sale so that they could get it out of their name and get rid of their obligation to maintain the home.  The realtor had signed an agreement with the client, listed the home and received several offers.  After receiving the offers they contacted me to get a copy of the bankruptcy paperwork to provide as part of their hardship package.  Much to their dismay they quickly learned upon contacting my office that the bankruptcy was not yet complete.  Yes the bankruptcy had been filed over a year ago.  Yes the discharge had been granted almost a year ago.  No that does not mean the case is over and no that does not mean that the Debtor has the authority to sell the home.
When an individual files for bankruptcy all of their property is transferred into their bankruptcy estate by operation of law.  This means that no deed is signed, not title is transferred, the property is just automatically transferred to the bankruptcy estate.  While the bankruptcy remains open all property of the state is under the control of the Bankruptcy trustee who is charged with running and administering the bankruptcy estate.  While the estate remains active only the bankruptcy trustee has the authority to sell the property.  In Michigan many trustees are holding cases open for one or two years after the bankruptcy is discharged to determine if their is any possibility of recovering money through a below value bid at the Sheriff’s sale.  In this case the Trustee had done just that.  The active portion of the bankruptcy was over, but the case remained open.
Beyond this Debtor’s lack of authority to list the home, this realtor was potentially facing another more serious problem.  When an individual is in an active bankruptcy they are not allowed to hire any professionals without bankruptcy court approval.  If the sale were to go through this realtor would be facing both the risk that the trustee would invalidate the sale leaving the realtor open to lawsuits from the purchaser, but also would be facing the prospect that the trustee could allow the sale to go through but simply void the commission of the realtor and keep it as part of the estate’s property to distribute to other creditors.
The lesson this realtor learned is that anytime a client comes to her to list a home and discloses that a bankruptcy was filed within the last three years the realtor should first contact the individuals bankruptcy attorney to determine the status of the case.  Additionally, the realtor should work closely with the bankruptcy attorney if the case does remain open to ensure that all proper authorizations are received
 
Second Chance Legal Services is a bankruptcy law firm located in Madison Heights, MI.  While we are located in Oakland County, we service Wayne, Oakland and Macomb County residents.  As Detroit Bankruptcy Attorneys we specialize in helping individuals escape their burden of debt in order to get a fresh start on their bright future.
Because of our small size our clients get individual attention.  You will have the same bankruptcy attorney throughout your case whether you are in a Chapter 7 Bankruptcy or a Chapter 13 Bankruptcy.  Your attorney will help guide you through the bankruptcy process in order to help you get a successful discharge of your debt.
It is important to note that Macomb County Bankruptcy Attorneys, Oakland County Bankruptcy Attorneys and Wayne County Bankruptcy Attorneys all deal with the same judges and trustees.  This is because all Michigan Bankruptcies are filed with the federal bankruptcy court in Detroit, MI.  For this reason, it is important that you choose an attorney not by location but rather by how comfortable you feel with them when you meet.  If you don’t feel comfortable with their knowledge, their experience or their demeanor you should seek out an attorney that you do feel comfortable with.
If you are interested in speaking with a Detroit bankruptcy attorney from Second Chance Legal Services, please contact our office at 248-629-6367 for a free initial consultation.