Can I sell my house to my child so that I can stop a foreclosure and continue to live there?
Yes, but your child will still have to pay off the loan. We have seen a number of situations in which people file a Chapter 13 bankruptcy case to stop a foreclosure sale. The debtor has no ability to make the payments necessary to cure a default and proposes a plan by which the home will be sold to the debtor’s child or children.
The likelihood of getting such a plan confirmed will depend upon the facts of each case. A purely speculative sale will not likely be sufficient. Some of the factors which a Court may look at include:
- Is the sale contingent on financing?
- Evidence of a buyer’s ability to obtain finance.
- Specified time within which the offer must be finalized, such as by removal of all contingencies.
- Is there a set closing date?
Other factors might include the relative position of the lender. For example, is the value of the property, or the sale price, more than enough to pay the lender in full? Is the lender adequately protected during the period of time prior to sale? Can the debtor make payments to the lender during this time?
These situations are decided on a case-by-case basis, so the facts and circumstances will vary and need to be considered.
We have also seen plans proposed in which there is no sale or ready buyer standing by. Rather, the debtor proposes to list the property or otherwise market it. In these instances, the chances of success will increase if there are deadlines for the time within which the property will be listed, within which an offer will be received and accepted, and within which the closing will take place. It will almost always be necessary to continue to insure the property and maintain it during any waiting period. We find it also helpful to be able during this time, prior to sale, to escrow for real property taxes.
Funding a plan with the sale of assets is rarely easy, but can be accomplished with good planning and by employing a reasonable approach which can be recognized by the Court.