Anyone heard of using Chapter 13 forms to do a short sale during a Chapter 7?

[sip]

We are in the middle of a Chapter 7 bk and are trying to complete a short sale at the same time. Have you heard of using Chapter 13 forms (Motion to Sell) and converting them to a Chapter 7 bankruptcy to send to lenders?

We are trying to figure out how to make the most persuasive case to complete a short sale and it seems like a Motion to Abandon makes it more likely they will foreclose - any comments on how to approach our lender would be very appreciated - this will be the last time we can try a short sale. The first lender had approved several buyers (some of whom flaked out), but the second lender was always the stall, so we have been forced into a bankruptcy and are trying to avoid foreclosure. Please share any other ideas, such as writing a letter or including comps of foreclosures in the neighborhood, to persuade our lender to do the short sale one more time.

Thanks for your help.

[despritfreya]

1. Why on earth would you want to waste your time with a short sale? You are in a bk. The debt is discharged. The only one who benefits from such a sale is the realtor who makes a commission, assuming you can get the lender(s) to agree to the sale. Ok, maybe there is one small benefit - getting your name off the property so you do not have to deal with the HOA- but good luck.

2. Filing a Motion to authorize a short sale is useless UNLESS you have the lender(s) in 100% agreement of all of the terms of the sale. Since the bk court cannot force such a sale if you do not have the lender(s) in 100% agreement, filing the Motion will only invite an Objection to it - and, you will be unable to overcome the objection so again, a waste of time.

3. The bk court really does not want to deal with a short sale, especially in the context of a Chapter 7 for the following reasons: 1)There is no benefit to the estate; 2) Chapter 7's, if a “no asset case”, are relatively short and the property will be abandoned within a few months therefore the homeowner should wait until the abandonment instead of clogging up the court system.

Best advice:

Stop beating your head against the wall and walk away.

Des.

[mijd]

It seems Short Sales are a bad subject here. Every situation is different. I chose a short sale instead of foreclosure for three reasons: 1.The co-buyer did not have to go through bankruptcy (unless the HELOC goes after him). 2. A lot of my neighbors in my community were friends, I was on the HOA board. I kept up with the HOA fees and they won't miss a beat as they would in a bank foreclosure. The community depends on these fees for upkeep of common elements and the outside of the buildings and also insurance. 3. Property values won't be as hard hit.
Prior to the HAMP program a certified credit councilor paid for by my HELCO suggested my best option would be a short sale. He advised me to negotiate with the 2nd lender and accept a reduced amount. Then after the closing I should file for chapter 7.
I can't understand the stall from your second lender. I thought California was a non-recourse state.

[tcreegan]

Hi sip, Hi mijd,

I can't understand the stall from your second lender. I thought California was a non-recourse state All the more reason for the 2nd to not get on board, they can't go after the deficiency and won't get anything from a short sale. Their lien will survive a Ch7 so there is a slight chance they can recover something. To get them on board, offer them some cash.

Never ran across your co-buyer situation on the forum mijd, if you BK your half, it does leave the co-buyer on the hook for the whole ball of wax.

the HOA fees and they won't miss a beat as they would in a bank foreclosure ...people around here have to be reminded that they have to keep paying the dues until their name comes off the deed.

Another problem w/ a short sale b4 BK would be the tax situation.

Trying a short sale during a BK is going to be complicated, definitely need a good lawyer.

The best option is to stay in the house and bank the mortgage payments. Stay until they throw you out on the dawn of the foreclosure sale. You save a bunch of $$ and the house doesn't sit vacant. Best of both worlds.

Tom in Colo