The 10- acre vacant parcel of land is owned by seven different owners as Tenants in Common. All of the owners signed the purchase contract and escrow was opened. During escrow, the buyer discovered that one of the owners filed a petition for bankruptcy and the bankruptcy is currently pending. Bankruptcy counsel has advised the parties that Bankruptcy Court approval will be required to close escrow. The buyer does not want to wait for Bankruptcy Court approval and is insisting that the transaction close as scheduled.
Assuming the buyer wants to proceed with the purchase and not cancel, must the buyer wait for Bankruptcy Court approval to close escrow?
The seller who is in bankruptcy must abide by the Bankruptcy Court Rules and bankruptcy law in general. That seller’s ownership interest is an asset of the bankruptcy estate. The bankruptcy trustee therefore has an obligation to ensure that the price is fair and in the best interest of the bankruptcy estate. Thus, the Bankruptcy Court must approve the sale before the buyer can close escrow.