Short Sale Before or After Filing for Chapter 7

[hussainm2009]

I have been follwing this great site for a while and find it very helpful. I would really appreciate if someone helps me with couple of questions.

Background: I have retained an attorney to file CH7 and we qualify for the chapter. I have a rental property and my primary residence. We are late on both for months. Both are currently in foreclosure. I don't want to keep the rental but will keep the primary residence if the lender is willing to modify the loan and place the arrear in the back of the mortgage. On my rental, I have a short sale offer accepted by the bank. I need to close the sale before March 22nd. The lender will ONLY release the lien to transfer ownership and won't say a word on whether the unpaid amount will be forgiven or they will seek a deficiency judgment. On my primary residence, in New York state, the attorney of the lender arranged a foreclosure settlement conference on April 9th with me to see if we settle the issue before it goes further in foreclosure proceeding.

So here are the questions:

1) Should I close the short sale on rental property before filing for BK7 and then include both mortgages on the property in BK? Will that protect us from getting deficiency judgment from the lender in future (since I included the mortgages in BK although the short sale was closed right before filing)? The other option is file BK first and then have my attorney file a motion to allow the sale of the rental. In that case, I have to ask the lender to extend the time to close the deal and have to spend money to have my attorney do the extra work. So which one is preferred? Sell the rental and then file or file BK first and then sell? Or either approach works without much difference?

2) What to expect from the foreclosure settlement conference on my primary residence? Should I wait for the conference to see what happens before I file for Ch7? If I file for Ch7 and express interest to keep the property, would that put me in stronger position to negotiate in the settlement since the lender will know I am so close to surrender the property in BK7 if they don't work with me? Or with filing for Ch7 (and being late by months), the settlement process will stop and the only outcome for me is to surrender the property?

PLEASE provide me some input based on your knowledge or experience!

Regards

[potsie834]

I short sold my home with Chase knowing they were not going to waive the deficiency balance. I did this because, the first got paid off in full, and about $17,000 went to Chase after the sale. After the sale, I figured I might be able to settle with them since they got a big chunk of change and I would not have to file BK, but Chase refused to waive the deficiency balance even after my father offered $8,000 more for them to waive the deficiency balance. Since they refused to waive it, I filed Chapter 7 in mid January. My 341 is in about week, and so far everything appears to be going OK. FYI, Chase Bank sucks; they are probably the most aggressive bank when it comes to recovering debt.

[wanabath]

File after, why leave any possible loose ends.

With that being said, you should never short sale your house without the lender agreeing to waive the deficiency balance. This should be in all your initial paperwork with the bank.

[keepswimming]

Hussain, I am curious...what did you do?

[tcreegan]

Hi keepswimming,

Don't take it personally if Hussain doesn't answer, he was posting in March....

Tom in Colo

[keepswimming]

Thanks, Tom.
I am thinking it is ok to ask about my situation then?

We are in the middle of a short sale with BofA. We no longer live in the home, and have moved to take a job in another state. The short sale is supposedly ready to be approved by BofA, but since we "FILED BK" they denied it this morning. That is what the SS specialist told the realtor this morning. I called my attorney and left messages and emails with the executive office at BofA that I have been communicating with since I gave up on dealing with the fifty five departments at bofa that know less than nothing. I have learned that BofA can, if willing, put in for a motion to release automatic stay.....or that I can pay to compel abandonment. I emailed my go to guy at bofa to see if they are willing to do this. Otherwise, I am willing to do it on my end.

It just makes no sense to me. The short sale offer is at 16k less than we owe on the property, not including the arrears and extra costs they are tacking on this last few months. Appraisal, according to the BPO, is at 146K and the offer is for 130K. No one, including attorneys and all the people at BofA I have spoken with, told me anything about this bk filing interrupting the short sale in any way. Hopefully the trustee will allow us to put in for this motion, and hopefully bofa is willing to do it. Anyone have any stories or advice in this area???