According to an article in the Star-Telegram, a federal bankruptcy judge approved the sale of the historic Ridglea Theater to FixFunding through a process called “deed in lieu of foreclosure.” Using the “deed in lieu of foreclosure” process will allow the debtor to return the property to the lender, avoid foreclosure and escape the loan default. The Maulsby Trust, which owned the theater, filed for Chapter 11 bankruptcy in July after FixFunding posted the property for foreclosure. But during the bankruptcy proceeding, another buyer came forward to purchase the property.
The article said:
“Doug King, Maulsby’s trustee, said last month that an unnamed buyer [later identified as Pergamos] had offered $1.75 million for the west-side landmark, which also includes an adjoining two-story office and retail building…But FixFunding, which had a right of first refusal on the property, matched the Pergamos offer and took the property back.”
FixFunding has not disclosed their plans for the historic building. But the Maulsby Trust is expected to earn $13,000 from the deed in lieu of foreclosure deal.
For individual debtors who are considering bankruptcy, deed in lieu of foreclosure is a powerful tool that will allow you to return your property to a lender and avoid paying any or most of the balance on the mortgage. It also helps the lender avoid the high cost of foreclosure. If you want to use a deed in lieu of foreclosure, you must do so voluntarily and in good faith. This means that your mortgage lender cannot pressure you into doing a deed in lieu of foreclosure. But beware, if your home is severely upside-down, your mortgage lender may not agree to a deed in lieu of foreclosure. Speak with your bankruptcy attorney to find out if this process will work for you.