Filed 9/30/10, 341 meeting on 11/03/10, should I short sale my house?

[dirkdigler]

hello,

Filed 9/30/10 for bk7, 341 meeting on 11/03/10, I'm surrendering my house which I owe $410k worth about $275k. should I short sale my house? or let it go to foreclosure. I live in california and would like to stay in the house for as long as possible to save some money. what is the best route? which one will keep me in the house the longest?


thank you

[Bkman2]

If in your BK you said you are going to let the house go then why would you short sell it? Most short sales will want you to sign a note to repay the difference or 1099-C you and then you would owe the IRS. If you let the bank(s) foreclose then the BK will cover the difference between what they sell it for and what you owe. You would not have to be on the hook to anyone.

[tcreegan]

Hi dirkdigler,

A short sale only benefits the real estate agent...they get a commision! You, on the other hand, get the bad things Bkman2 mentioned.

To stay in your house the longest, let it go to foreclosure. The lender will probably wait out the BK, then begin foreclosure which has a couple waiting periods in it (check your state foreclosure law) and then most likely will sit on it b/c the market is poop...

Another thing to check out is a 'cash for keys' program. Some lenders pay a nice chunk of $ for folks to move out and get the house ready for market.

Good luck with your BK,

Tom in Colo

[dirkdigler]

so if I do a short sale the IRS will for sure tax me for the difference the bank forgives?

[tcreegan]

Hi again dirk,

Gotta get the short sale idea out of your head......

You already filed, right? hate to tell you but now the house is out of your hands. It is up to the trustee whether to attempt a sale or let if foreclose. You can't.

Time to take a deep breath and let 'er go....

Tom in Colo

Tom in Colo

[free2breathe]

The bank would issue a tax document at the end of the year detailing how much the difference was, and yes, you would have to list that as income and you would be taxed. However, Tom is paying more attention than I was...since you've already filed, the short sale is not an option for you.

[keptdigging]

Actually after filing a Ch 7 you no longer personally owe the debt (only the lien against the property remains). Since the debt is discharged by your bk, not by the short sale, there shouldn't be any tax liability. (If this weren't the case, there's still no tax liability if you were insolvent... but you probably aren't because you don't owe the debt--personally--in the first place.)

I can't for the life of me think of any reason to go through the hassle of a short sale.

Also as previously mentioned, it's a lot less in your hands than you think. You can't sell ANYTHING until the Trustee abandons it, and that can't happen until after your 341 meeting. In the meantime, since you've stated in your filing that you're surrendering, your mortgage holder might ask for relief from stay.

I think you should live rent free as long as you can, but use that time to focus on what comes next.

[dirkdigler]

Thank you for everyones input and help. I think I'll skip the short sale, a friend of a friend (whose a realtor) keeps telling me I should short sale the house after I discharge buying me more time in my house, but now from everyones response here and other forums I think I'll just wait for a foreclosure.