I bought a house once which had some legal complications. In the scheme of all things, the issues were minor but involved a seller who was dealing with foreclosure on the property. In the middle of my purchase process I realized that I would have been better off to have waited for the property to be foreclosed on and then purchased it from the former owner who held the note privately.
I mention this because if you choose to back out or just can’t make it work, which seems likely, don’t write it off in case you are still looking in six months or a year. Hopefully, this will not be the case and you will be in another even better place by that time. But just in case… Keep tabs on it and on who the new owner will be after the bankruptcy. Since you are now intimately acquainted with this property and with all of its quirks and assets, you will be in a very good position to make a quick offer and to be really comfortable with whatever price you are willing to pay.
Edit to add:
Please don’t delete any posts even though this whole thread may have turned out to be a big Nevermind as far as you are concerned. I get that you may be seeing this topic as a negative reminder of the sorry situation you have experienced and that it is a bummer to even see it, much less rehash it. But this thread ties in so nicely with the theme of the other real estate thread with its accounts of the many (often negative) experiences people are having with this difficult market. Your account is really educational and is valuable.