If the guy files for bankruptcy your Grandfather would then become a creditor of the bankrupt estate.  He has a contract for the purchase of land and technically if the guy default on paying him then he has a right to sue.  Depending how the contract is worded and what it says, it may be able to be reaffirmed in the bankruptcy (your Grandfather is technically in the position of being a "bank" here and mortgages can sometimes be affirmed, meaning that the debtor agrees to continue to pay the bank for the property.  Some states do not require a formal agreement to reaffirm but actions by the debtor can create an agreement). Seek some advice in your area and bring the agreement.  Good luck.