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Mr Credit, Real Estate Pro in San Diego, CA

Do You file for Bankruptcy before or after a Short Sale?

Asked by Mr Credit, San Diego, CA Sat Aug 27, 2011

I actually know the answer, but curious to see who else does...

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Answers

7
Hello Mr Credit~

It looks like nobody wanted to step up to your question, so I will attempt. In MOST cases I would say after. Often times when a homeowner decides to short sale, and is no longer making payments on their home because of their hardship, this may allow them to get caught up on other bills and not have to file at all. I would reccommend BK after short sale since there may be a promissory note or a defieciency judgement that could be wiped out in a BK.

One exception to this, is a looming foreclosure and there is not enough time to get the short sale started and the sale date postponed...then filing a BK WILL delay the sale date and stop the foreclosure during the process.
Web Reference: http://ChrisGorno.com
1 vote Thank Flag Link Wed Oct 26, 2011
Can I claim for bankrupt after short sale if the processing doesn't cover the loan
0 votes Thank Flag Link Sat Dec 15, 2012
File for bankruptcy after the short sale! It's a complicated situation with many variables but if you can wait to file for bankruptcy, wait and be sure to short sale and do NOT foreclose. That way, when you file, you start fresh. If you file before, everything stops and lender cannot perform their duty. Some times, home owners will file to delay foreclosure but this is their last case scenario. So, avoid foreclosure, short sale the home, then file for bankruptcy and start fresh! Many people are or have been in tough situations but talk with a bankruptcy attorney to help you minimize the damage.
0 votes Thank Flag Link Thu Jun 21, 2012
Derek, You are right about considering the totality of the circumstances, but if You work with the right Attorney, filing before is always better. There is paperwork called a "Relief from Stay" that the Attorney can file with the Court so You can work on the Short Sale the entire time You are in Bankruptcy. It also guarantees that You delete any liability from Recourse or the IRS with regard to the "Short" part of either a Short Sale or Foreclosure. If You file afterward, then You don't get the benefit of having that mortgage payment as a Liability, may not qualify for BK anymore, AND You could have liability from recourse and/or the IRS... If You need an Attorney who knows this stuff inside and out, call William McDonald at 1.800.997.1235 and mention "Mr. Credit" to get Free Consults for Your clients.
Flag Thu Jun 21, 2012
I have a short sale listing right now that I have an offer accepted. The seller filed for BK and discharged back in February. I submitted the offer to Bank of America and they said they can't move forward because of the BK, I told them that it was discharged so they requested the discharge papers so we can move forward. They said it would take 7 to 10 days for them to review the discharge and remove it from the BK department at B of A. So now I'm just waiting for that, I should move forward here in a few days.
0 votes Thank Flag Link Wed Jun 13, 2012
Phil, since it was filed long before You started with the Short Sale, that makes sense. Of course, now that the BK has discharged, Your client will have absolutely ZERO liability associated with the home and the mortgages. If they had filed today and You wanted to list it tomorrow, then it would be important to have a good BK attorney to file the right paperwork and not "get in your way" on the transaction.
Flag Wed Jun 13, 2012
Hi Barb~

This is a perfect time to reach out to Mr Credit and ask all of your questions. I know his qualifications from being in this Industry and his excellent reputation. If you are going to short sale there would be no capital gains taxes, because there is no profit/no gain. If you are wondering about the tax, on the write off the banks takes, the Debt Forgivesness Act goes through Dec 31, 2012 (only a little more than 6 more months). Those Homeowners thinking about a short sale, may want to gather the knowledge and tax/legal advice and get started. We don't know if this bill will be extended. In most cases, as long as there is insolvency, there is no tax consequence in CA.

Good Luck Barb! If you have more questions let me know.

Chris Gorno
Windermere Real Estate
(619)788-4345
0 votes Thank Flag Link Sun Jun 3, 2012
You ask a good question. I suspect you're not getting a lot of answers because this constitutes a legal question and none of us are attorneys. I strongly suggest that anyone int his situation consult a legal hotline or seek legal assistance. Generally, you would need an attorney for bankruptcy anyway, so it's a good question to ask your lawyer.
0 votes Thank Flag Link Sun Jun 3, 2012
I am going through this right now, I do not know the answer but i would love to find out what is the best alternative. I am concerned about taxes on capital gains. What is the best way to go?
0 votes Thank Flag Link Sat Jun 2, 2012
Barb, by filing for BK before the Short Sale, You eliminate ALL liability associated with the Property as the Note is deleted in the BK. (Not the lien, but the Note) I would recommend You call William McDonald, Esq. for a Free Consultation about BK. Just mention Mr. Credit when You call 858.437.0103

I can also be reached via email on http://www.MrCreditRadio.com

Hope it helps!
Flag Sun Jun 3, 2012
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