March 7. February 5. January 6. December 7. September 7. June 6. April 7. February 6. October 7. March 4. February January December November October September August July June May April March July 4. And overwhelmingly, think of filing for bankruptcy, or if you need to, possibly, sell your home short. It is quite important to understand what a short sale means? In simple terms, a short sale happens when a homeowner tries to sell a property for a value less than what they owe to the mortgage company.
Notably, both the lender and the borrower need to mutually accept the lowered selling price as the full payment towards the debt. Short sales can help you in many ways.
For instance, it can help you get rid of the debts that you cannot pay. And consequently, sustain a good credit score. On the other hand, a short sale also forfeits your ownership rights to the property. That means you would no longer hold possession of your home.
Because, the short sale may create a tax liability which cannot be discharged in bankruptcy and, by eliminating the secured debt which you do by the short sale you make it less likely that you will qualify for bankruptcy at least Chapter 7.
If you wait to do a short sale until after the bankruptcy proceeding is filed, you get to claim the secured debt mortgage debt in your bankruptcy and it helps you qualify to file the bankruptcy. After you file the bankruptcy, you can still complete a short sale. Why do a short sale after filing for bankruptcy? Further, certain lenders have underwriting criteria which will prevent you from obtaining a mortgage loan in the future if you have a foreclosure on your credit report.
This concept is simply realizing where your economic road is heading; understanding the requirements to qualify to file bankruptcy, and; filing for bankruptcy before you create a situation that disqualifies you from doing so.
And what happens if you might file bankruptcy, as well? If you have decided to file for Chapter 7 bankruptcy and are currently trying to sell a home via short sale, there is usually no reason to continue with the short sale. Bankruptcy gives the borrower the option of surrendering the property back to the bank with no continuing obligation under the mortgage and no corresponding tax liability for the forgiveness of debt usually a taxable event.
In essence, surrendering a home in bankruptcy allows the borrower to simply give back the keys and walk away, leaving the purpose behind the short sale moot. Bottom line: If you are going to file Chapter 7 bankruptcy, why deal with the stress of negotiating a short sale? However, if you still live in an area where homes are severely underwater and there is a backlog of foreclosures , it could make sense to go through with a short sale to get title out of your name. The analysis of a short sale bankruptcy is slightly different in a Chapter 13 setting.
Chapter 13 bankruptcy allows the debtor to surrender a home, as well; however, any remaining deficiency judgment after foreclosure will be paid out as unsecured debt through the Chapter 13 plan.
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