Legal Question in Real Estate Law in California

Re: Seller ''Carrying'' Note - How to make Bankruptcy Proof

You will want to retain a carefully drafted trust deed and carefuly drafted escrow instructions limiting the amount of financing -- everything supervised by an attorney. It would be around $2000 - $3000 in legal fees. 310.266.4115

Re: Seller ''Carrying'' Note - How to make Bankruptcy Proof

Purchase-money loans are secured ONLY by the real property, NOT the other assets of the borrower. If the borrower defaulted, your recourse would be to foreclose. If the foreclosure sale didn't produce enough to pay the expenses of sale and pay off both loans as well, you'd be left holding the bag even if the borrower were a multi-billionaire.

The advantage of having a credit-worthy borrower is that he is more likely not to default in the first place, and not that you can go after him if foreclosure doesn't make you whole.

There are some ways to get around the anti-deficiancy statutes on a purchase-money loan, but you would need legal assistance, and I do not advise going that route. Far better, just don't lend too much; get an adequate down payment so that if you have to foreclose you aren't left with a deficiency.

Sure, a bankruptcy will temporarily stop a foreclosure, but it is fairly quick and easy to get relief from the automatic stay.

Re: Seller ''Carrying'' Note - How to make Bankruptcy Proof

you shouldn't be writing anything into the note --- get yourself immediatly, now, today, tomorrow a good real estate attorney to handle this for you as you don't have the knowledge, experience or ability to do this yourself and more likley than not your will cause more problems than you can imagine if you proceed on your own

Re: Seller ''Carrying'' Note - How to make Bankruptcy Proof

There are a number of issues here. First, you seem to imply that you are already carrying a note from the buyer/renter. Is this a regular "sale," by which I mean have you given the renter a deed to the property? Is it a sale/leaseback? Is it an installment sale? In the case of the latter, you would still own the deed. In the case of the first option, you will want at the very least a Deed of Trust on the property as well as an "acceleration clause" in the note. While you will probably be able, in a bankruptcy hearing, to take the property out of the bankruptcy in order to pay off your loan, you have a bigger problem - the owner of the first priority lien on the property. Should your buyer default on your loan, chances are he will also foreclose on the first (unless the first is in your name). I would be happy to discuss these and other issues with you if you wish. Feel free to contact me.