We bought a house on land contract 2 years ago and now the owner is filing bankruptcy. What do we do?

We bought a house by land contract 2 years ago. We have never missed a payment and the mortgage is, as of now, paid up to date. The guy we purchased from (the guy who still holds a mortgage on the property) was a small business owner and his business went under. Now, he is filing Chapter 13 bankruptcy because of his business losses, but this only allows him to protect the house he personally lives in, despite the fact the mortgage on this property is good. His lawyer is telling us to just keep making the mortgage payments (directly to the mortgage company rather than thru him) and well be good because it’s not in default. The mortgage is thru GMAC, who we hear are not fun to work with. Are we going lose the house? Should we stop making payments? Scared sh*tless right now, we have three children, have invested a lot of money into the house on renovations (roughly K), and we recieved the K Home Buyers Tax Credit when we signed the contract. Feel like we’re in deep. HELP!!!

2 Responses to “We bought a house on land contract 2 years ago and now the owner is filing bankruptcy. What do we do?”

  1. Bill Says:

    This is why people should never enter into a land contract that is still mortgaged in the sellers name. You need to have your own attorney who can review the contract and perhaps approach GMAC to see if they will assist in your actual purchase of the property. If you can not qualify for a loan(which is why you probably used the land purchase approach) or if the property does not appraise high enough, you may lose all you have invested.

  2. William M Says:

    You made mortgage payments to your mortgagee; however, since his business was in financial trouble, he may have diverted your payments to other more pressing needs. You do not know if his mortgage with GMAC is current. You should contact GMAC and determine the status of the mortgage. It may well be numerous payments late. If GMAC forecloses the mortgage your interests will be wiped out. You need to contact an attorney if you are interested in keeping the property. An attorney may be able to work out financial arrangements with GMAC.