Is there of writing a promissory note / 2nd mortgage that will not allow the buyer to discharge the debt if they were to go bankrupt? 7 Answers as of January 24, 2017

I have been asked to give some seller financing on the sale of a residential property.

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R. Steven Chambers PLLC | R. Steven Chambers PLLC
No. Any agreement not to file bankruptcy or not to include a specific debt in a bankruptcy is unenforceable. Your only protection, if the borrower files, is the second mortgage.
Answer Applies to: Utah
Replied: 1/24/2017
GARCIA & GONZALES, P.C.
GARCIA & GONZALES, P.C. | Richard N. Gonzales
Meet with a lawyer experienced in both real estate matters and bankruptcy. The advice will cost you of course, but it will save you a lot of grief down the road. Good luck!
Answer Applies to: Colorado
Replied: 1/24/2017
Janet A. Lawson Bankruptcy Attorney
Janet A. Lawson Bankruptcy Attorney | Janet Lawson
This depends on what state you are in. Loans used to purchase property in California are subject to the "one action rule." This means you can be foreclosed out and have NO remedy for the deficiency. The debtor does not even have to file for bankruptcy for you to lose your investment. Be careful here. Other states might be different.
Answer Applies to: California
Replied: 1/23/2017
Stephens Gourley & Bywater | David A. Stephens
You can discharge your personal liability on the second mortgage in bankruptcy. However, if you do not pay it, the second can still foreclose on the property securing the loan.
Answer Applies to: Nevada
Replied: 1/23/2017
Richard B. Jacobson & Associates, LLC | Richard B. Jacobson
A mortgage, of itself, is generally not affected by a bankruptcy. And most lawyers would agree that you should be sure to have such a mortgage, and to record it with the real estate records in your county. But in addition to the mortgage, which is a security interest in real estate, there is likely a mortgage note ? the promise to pay and that can be discharged in the bankruptcy. However, if the value of the property should fall below the balance due on the first mortgage, then your second mortgage would probably have no value. It's always a good idea to consult an experienced lawyer who can consider all the facts and all of the details.
Answer Applies to: Wisconsin
Replied: 1/23/2017
    A Fresh Start
    A Fresh Start | Dorothy G Bunce
    Such a contract provision would be void as against public policy. You should be getting adequate security to insure payment of the promissory note. In the old days, you could require the first born child as collateral, but nowadays, that is a provision that also violates public policy.
    Answer Applies to: Nevada
    Replied: 1/23/2017
    Garner Law Office
    Garner Law Office | Daniel Garner
    No, any provision like that in the contract would be void as against public policy. The best strategy is to make sure there is sufficient equity in the property to cover the second mortgage in the event of default/foreclosure.
    Answer Applies to: Oregon
    Replied: 1/23/2017
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