Selling a house to an insider within a year???

[thestacybunch]

Indiana

In April of 2006 my husband and I entered into a land contract with my father to sell our second home. The contract price was $38,750, which at the time was fair market value. He made payments for 24 months, and made substantial improvements to the property. This May we completed the sale when he obtained financing on the home. In order to obtain the financing, we gifted him 20% of the home's equity as the down payment and another 6% for his closing costs and prepaids. Which made the sales contract (not the land contract) price $45,000 (which is maxed out market value). We felt that he was entitled to the equity, since he made all of the improvements. Ultimately, we still recieved our $38,750 between his 24 payments and what we recieved in the sale. Now, 9 months later we are attempting to file for Chapter 7, because my husband lost his job over the summer, which was unforseen. Will a bankruptcy trustee try to void this sale? At the time of the sale, we never considered that we would be filing bankruptcy less than a year later, and I do not want my father to lose his home.

[tranquility]

In order to obtain the financing, we gifted him 20% of the home's equity as the down payment and another 6% for his closing costs and prepaids.

While you need to speak to a BK attorney to be sure, why should you be able to gift anything significant when you have debts which need to be paid?

[thestacybunch]

the gift of equity was equity that was obtained through improvements made to the home by my father, not us. Our land contract stated that as long as he was faithful to the contract, he would maintain an interest in any equity that was obtained by his improvements to the real estate. The land contract also said that, if necessary that equity could be used to help him obtain financing on the home. We were just doing what the land contract said.

[HomeGuru]

Originally Posted by thestacybunch

Indiana

In April of 2006 my husband and I entered into a land contract with my father to sell our second home. The contract price was $38,750, which at the time was fair market value. He made payments for 24 months, and made substantial improvements to the property. This May we completed the sale when he obtained financing on the home. In order to obtain the financing, we gifted him 20% of the home's equity as the down payment and another 6% for his closing costs and prepaids. Which made the sales contract (not the land contract) price $45,000 (which is maxed out market value). We felt that he was entitled to the equity, since he made all of the improvements. Ultimately, we still recieved our $38,750 between his 24 payments and what we recieved in the sale. Now, 9 months later we are attempting to file for Chapter 7, because my husband lost his job over the summer, which was unforseen. Will a bankruptcy trustee try to void this sale? At the time of the sale, we never considered that we would be filing bankruptcy less than a year later, and I do not want my father to lose his home.

***A: since this was a bonafide sale, the BK Trustee should not have an issue as the intent was not to defraud by a transfer of an asset.