If my husband and me are going to get a houseboat on a promissory note between us and the owner, what happens if they file for bankruptcy?
Question Details: The owner owes money to the bank on the houseboat. If we do the promissory note and the owner decides to file for bankruptcy, what will happen? Will we lose the houseboat even though we have a promissory note to buy it?
Yes, you will almost certainly lose the houseboat and most, if not all, of any amounts already paid to the owner when he files for bankruptcy:
1) If he owes money to the bank on the boat and doesn't pay, then the bank will repossess the houseboat--filing bankruptcy does NOT stop that, though it will save him from having the bank sue him from any surplus owed over the then then-current value of the houseboat. You will have no right to get the boat from the bank...though it's possible that if you know who the bank is and contact them, that they may choose to sell to you at some mutually agreeable price.
2) Once he files bankruptcy, your ability to recover the money you've paid him will be extremely limited.
If possible, avoid entering into transactions with people who are or may be in financial distress.