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[ Follow Ups ] [ Post Followup ] [ The Forum Board ] [ FAQ ] Re: Foreclosure of Deceased Trustor's Realty Posted by Rick Harmon on August 31, 2003 at 8:06 AM In Reply to: Foreclosure On Estate posted by SeanW on August 31, 2003 at 4:27 AM : When an estate in in foreclosure, do the heirs face any negative credit consequences if they do not stop it? : Would you think that heirs have less incentive to file bankruptcy, in an attempt to "keep the house?" : If they still have an incentive, what if only one heir files bankruptcy? Is that enough-- or would they all need to, in order to stay the foreclosure? (That sounds like it'd be a tough thing to get agreement on!) Sean I'll presume that this is a California matter for talk sake... A decedent's heirs do not have any personal liability for the debts of a deceased trustor (borrower) so this will in NO WAY affect their credit. What you should understand is an old saying of mine: "Heirs know how to add, but not how to subtract." This means that the net equitable value of each heir is reduced by paying all of the debts of the decedent, including secured and unsecured debts, medical bills (these can wipe out an estate if the decedent or pre-decedeased spouse received Medi-Cal insurance benefits, and most certainly the attorney's fee as well as the administrator's fee. Hopefully, you get the picture that most heirs forget that their 1/4 interest in a $100,000 estate is not worth anything close to $25,000, maybe worthless if debts are big. We see it all the time! Bankruptcy is for living people; dead guys tell no lies. In spite of this, the heirs of some decedents do lie, and file BK with the intent to stop the foreclosure. As a lender who works with probate real estate, I think this is bad practice. If the intent is to stop the foreclosure there are perhaps better ways to do this. I'm sort of the legal profession's mavin on probate real estate foreclosure and I advise all of my attorney clients to avoid muddying up the water this way. Here's a better plan: Purchase all of the heir's interests (or a controlling %) and then have one of them get appointed special administrator for the purpose of selling you the property and salvaging the equity. Don't even think of using anyone other than an atttorney who is a long-time, experienced probate-only practitioner. IF they SELL the property to you on the cheap, YOU'RE not responsible for the decedent's unsecured debts. THe reason you want to buy the heirs' interest is so that the administrator won't have anyone to object to the sale price (courts may whine if sold at less than 90% of referee-appraised value and heirs/debtors protest). Hope this helps...I've just given you what took me many years to perfect. Rick Harmon Follow Ups: Re: Foreclosure of Deceased Trustor's Realty SeanW 3:27 PM, 09/02/03 (0) Post a Followup: Name : E-Mail : Subject : Comments: : : When an estate in in foreclosure, do the heirs face any negative credit consequences if they do not stop it? : : Would you think that heirs have less incentive to file bankruptcy, in an attempt to "keep the house?" : : If they still have an incentive, what if only one heir files bankruptcy? Is that enough-- or would they all need to, in order to stay the foreclosure? (That sounds like it'd be a tough thing to get agreement on!) : Sean : I'll presume that this is a California matter for talk sake... : A decedent's heirs do not have any personal liability for the debts of a deceased trustor (borrower) so this will in NO WAY affect their credit. : What you should understand is an old saying of mine: "Heirs know how to add, but not how to subtract." This means that the net equitable value of each heir is reduced by paying all of the debts of the decedent, including secured and unsecured debts, medical bills (these can wipe out an estate if the decedent or pre-decedeased spouse received Medi-Cal insurance benefits, and most certainly the attorney's fee as well as the administrator's fee. Hopefully, you get the picture that most heirs forget that their 1/4 interest in a $100,000 estate is not worth anything close to $25,000, maybe worthless if debts are big. We see it all the time! : Bankruptcy is for living people; dead guys tell no lies. In spite of this, the heirs of some decedents do lie, and file BK with the intent to stop the foreclosure. As a lender who works with probate real estate, I think this is bad practice. If the intent is to stop the foreclosure there are perhaps better ways to do this. I'm sort of the legal profession's mavin on probate real estate foreclosure and I advise all of my attorney clients to avoid muddying up the water this way. : Here's a better plan: Purchase all of the heir's interests (or a controlling %) and then have one of them get appointed special administrator for the purpose of selling you the property and salvaging the equity. Don't even think of using anyone other than an atttorney who is a long-time, experienced probate-only practitioner. IF they SELL the property to you on the cheap, YOU'RE not responsible for the decedent's unsecured debts. THe reason you want to buy the heirs' interest is so that the administrator won't have anyone to object to the sale price (courts may whine if sold at less than 90% of referee-appraised value and heirs/debtors protest). : Hope this helps...I've just given you what took me many years to perfect. : Rick Harmon Optional Link URL: Link Title: Optional Image URL: [ Follow Ups ] [ Post Followup ] [ The Forum Board ] [ FAQ ] WWWAdmin 2.0a © 1997 Matt Wright and DBasics Software Company, All Rights Reserved

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