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A new trend has emerged in the Bankruptcy process in Florida.  Third party investors are increasingly approaching Chapter 7 trustees and offering to buy the bankruptcy estate’s interest in the debtors’ real property for a small amount of money.  The investor who buys the property, typically for a few thousand dollars, acquires title to the property, rents it out, and delays the foreclosure process while making profit from the rentals.

In a Chapter 7 bankruptcy procedure, a trustee takes over the assets of the debtor’s estate, liquidates them, subject to any applicable exemptions, and then distributes the proceeds to the creditors.  Generally, trustees would abandon a property of the estate that is secured by a mortgage lien in excess of the value.  The recent trend to sell the estate’s interest in the property essentially curtails any hope the debtors may have to pursue a loan modification and to reach any arrangement with the lender to prevent foreclosure of their property. 

Some creditor’s attorneys are concerned this practice will cause delays in the foreclosure process, and increase litigations costs.  Creditor attorneys are also alarmed that in some instances these third-party investors are corporate entities affiliated with foreclosure defense firms.

Obviously, this new trend will not affect debtors who claim the homestead exemption on their property, which will allow them to keep the property after the bankruptcy.

Craig I. Kelley, West Palm Beach Bankruptcy Attorney of Kelley & Fulton, P.L., represents individual and business debtors and creditors in Chapter 7, 11, 12, and 13 proceedings. He is A.V. rated by Martindale-Hubbell directory, which is the highest rating as voted on by his peers in the legal profession. He is an Adjunct Professor of Bankruptcy Law at Palm Beach Community College and lectures nationally on the subject. You can get more information about bankruptcy from an experienced bankruptcy attorney in West Palm Beach by contacting Craig I. Kelley at 561-491-1200 or by emailing   For more information log on to