4.2 Interests in Real Property

• Library: Bankruptcy Practice in Virginia (Virginia CLE) (2017 Ed.)

4.2 INTERESTS IN REAL PROPERTY

4.201 Life Estates. An estate that is created expressly for life is property of the estate, and its value is calculated using tables provided in the Virginia Code. ¹²⁹

4.202 Equity or Rights of Redemption. Where the debtor has defaulted before bankruptcy, the only way for the debtor to retain the property absent creditor consent is to exercise his or her right of redemption. ¹³⁰ The debtor has the right to redeem the collateral and cure the default before the creditor disposes of the property. ¹³¹ Common law provides for the equitable right to redeem the property until the foreclosure sale. ¹³² When the property is sold, the debtor loses equitable interest in the property unless the foreclosure sale process is deficient. ¹³³ Typically, the debtor's right to redeem real estate is extinguished when the highest bidder executes a memorandum of sale with the trustee under the deed of trust.

Practice Note: When interviewing a potential debtor, be sure to ascertain the status of foreclosures of real property. If facts are disclosed that might give rise to a voiding of a completed foreclosure, be sure to list the property as an asset and disclose its status. Also, consider protecting any potential value by exemption.

4.203 Leases and Contracts for Sale.

A. Leases. It is important to distinguish between a true lease and a security interest. ¹³⁴ If a lease provides for little or no consideration for the option to purchase or if the purchase price of the property is less than fair

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