When is a bankruptcy search typically required in a property transaction?

• A. Always
• B. Only when the seller is bankrupt
• C. When buying with a mortgage
• D. Never

Answer: (C)

When you’re buying with a mortgage, a bankruptcy search is typically required. The lender wants to confirm the buyer isn’t bankrupt or insolvent, because a bankrupt purchaser cannot properly complete a mortgage and the lender’s security could be at risk if insolvency occurs before or after completion. The search flags any bankruptcy orders or ongoing proceedings so the conveyancer can address potential issues before the transfer of title. If you were paying cash, the lender’s requirement wouldn’t apply, and the check would be less likely to be mandatory. While a seller’s bankruptcy can complicate a sale, the standard practice in mortgage transactions centers on the buyer’s solvency to protect the lender’s interest.