Wholesaling Bankruptcy Properties in Texas

The short answer

Can you buy a house from someone in bankruptcy in Texas?

Yes, but almost always with the bankruptcy court’s approval. The owner cannot simply sign a contract and close.

Filing bankruptcy puts an automatic stay in place that pauses foreclosures and most collection. Property becomes part of the bankruptcy estate. In Chapter 7 a trustee may sell non-exempt property; in Chapter 13 the debtor can sell, but usually needs a court order approving the sale. Either way, your contract should be made subject to court approval, and title will insist on seeing the order.

The opportunity

Why bankruptcy can lead to Texas wholesale deals

Trustees want to turn property into cash for creditors quickly, and they sell as-is with no repairs or warranties. Chapter 13 debtors who fall behind on their plan may need to sell to stay current. Both situations favor buyers who can close on a court’s timeline and accept a house exactly as it stands.

Lead sources

How to find bankruptcy properties in Texas

• Court records. Bankruptcy filings are public through the federal PACER system. Schedules list real property, values and liens.
• Trustee sale notices. Trustees must give notice of proposed sales. Many post them with the court or through brokers they hire.
• Real estate brokers for trustees. Trustees often hire brokers to sell estate property. Introduce yourself as a cash buyer.
• Debtor attorneys. Chapter 13 attorneys sometimes need a buyer for a client’s house to keep a plan alive.
• Foreclosure lists that stopped. A foreclosure canceled right before sale may signal a bankruptcy filing. See Texas pre-foreclosure properties.

Your exit

Buyers for court-approved sales

Bankruptcy sales can attract overbids. A trustee may ask the court to approve your contract but allow others to bid higher at the hearing. Tell your buyer this can happen and that the timeline depends on the court’s calendar.

Assignments need care here. The court approves a sale to a named buyer, so ask the trustee and title whether an assignment is acceptable, and disclose it openly. Many wholesalers instead close in their own name and resell.

Step by step

How to start wholesaling bankruptcy properties in Texas

1. Read the schedules. Check the property, its value, the liens and whether it is claimed as exempt.
2. Identify who can sell. Chapter 7 trustee or Chapter 13 debtor with court approval.
3. Make a written offer. Send it to the trustee or the debtor’s attorney, subject to court approval.
4. Disclose your intent. Give the written assignment disclosure Texas requires and tell the trustee you may assign.
5. Run the numbers. Price with the MAO calculator and expect possible overbids.
6. Wait for the order. The court approves the sale after notice to creditors.
7. Close through title. Title closes once the order is entered and any appeal period passes.

A rental house in Fort Worth sat inside a Chapter 7 case. The debtor owed more than he could pay, and the house was not his homestead, so the trustee planned to sell it for the creditors. You found the case on PACER and called the trustee’s office to ask whether it would take an as-is offer.

The trustee needed a clean, quick buyer and a price that would hold up when creditors saw it. You submitted $140,000 with proof of funds from a buyer, the written assignment disclosure and a contract that allowed for court approval. The trustee filed a motion to sell, and no creditor objected.

A local investor paid $150,000 for the assignment and closed after the court’s order. The lender received its $118,000 payoff, and the remaining money went into the bankruptcy estate. The trustee later sent you a second property because the first one had closed without trouble.

Texas rules to know

The Texas homestead exemption in bankruptcy

Texas protects a homestead with no dollar cap under state law, limited instead by acreage: up to 10 acres in a city and up to 100 acres for a single person or 200 for a family in rural areas. Because of this, Chapter 7 trustees rarely sell a Texas debtor’s long-held homestead.

Federal law can cap that exemption for a home bought within about 40 months before filing, which is when trustees may sell a homestead. Rentals, second homes and investment properties are the most common trustee sales.

Learn it with a mentor

Get guidance on your first court sale

Bankruptcy deals run on court calendars. Mentorship students review the schedules and their offer with a mentor first.

FAQ

Bankruptcy Properties in Texas: common questions

Keep going

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