A prior post talked about the situation where you are the buyer on a contract for deed, are current, and the seller files bankruptcy. (Basically the message is: You’re okay for the term of the contract).
But what if you are behind on your contract for deed? Then the situation can be an emergency. The reason is this: In Minnesota a contract for deed can be canceled (terminated) by giving a particular notice which gives the buyer 60 days to catch up. (There are a few oddball situations where the timing would be different.) If you don’t catch up within that 60 days you lose your purchaser’s interest and all the payments you have made and any equity you have built up.
You say to yourself “The Bankruptcy Code stops foreclosures, so I’ll file bankruptcy.” Well, it is true that bankruptcies can stop foreclosures, but once the notice of cancellation is correctly served, a “clock” is running. And bankruptcy won’t stop that clock from running.
The Bankruptcy Code does give an automatic 60-days-from-filing extension on this “clock”, but Bankruptcy Judge Gregory Kishel wrote an opinion several years ago in which he said that the extension was in favor of the bankruptcy trustee, not the person who files the bankruptcy for themselves. I don’t know how widely that opinion is honored in real life – sellers often just want their money, not the property back– but it is certainly a concern.
So, what’s the moral?
If you are behind on your contract for deed, we should be talking about filing a chapter 13 bankruptcy BEFORE you are served with a notice of cancellation. If we file BEFORE the notice is served, then the “clock” isn’t running and we can catch up the missed payments through the chapter 13 plan while you make the current monthly payments directly. Or, if the financial hardship is temporary, we can file a chapter 7 to get rid of your other debts and you can catch up on the contract for deed yourself during or after the bankruptcy.
As always, there are exceptions and exceptions to exceptions, so if this post applies to you, give me a call at (320) 252-4473
