Listings & Bankruptcy

Elizabeth Feather, Esquire

Q.What do you do when your seller client files for bankruptcy after he has engaged your services?

A.Hire legal counsel immediately. You will need representation if you want to get paid for the sale of the seller's property. Do not assume or expect the seller's bankruptcy attorney to protect your interest. The seller's attorney does not represent you. In most cases, the seller's attorney will not go to bat for you with the bankruptcy court. In order to protect your representation of the seller and any commission, you need to hire an attorney to petition the bankruptcy court to appoint you as the seller's real estate agent. The court will also have to approve your commission prior to settlement in order to get paid.

If you ignore the seller's recent bankruptcy filing and continue representing the seller, you may not get paid. You will most definitely not get paid if you wait until after settlement and then seek bankruptcy court approval for your appointment and commission. The bankruptcy code and case law are very clear. Unless you can prove exigent circumstances as to why you waited to apply for appointment and your commission until after settlement, you will not get paid. It is very difficult to qualify a situation as exigent and it is extremely rare that the court makes a finding of exigent circumstances thereby allowing you to get paid.

To obtain a commission from a transaction involving a bankrupt seller, you must act prior to settlement by engaging counsel to file the appropriate motions. Doing so will most likely result in your receiving your earned commission.