Short Sale Following Chapter 7

Sarasota Short Sale Attorney

Many homeowners dealing with an underwater mortgage have made the decision to file a petition for Chapter 7 bankruptcy relief to save their home from imminent foreclosure. Through a Chapter 7 bankruptcy, the assets of the debtor are liquidated and their debts are discharged relieving the debtor from the necessity of paying back their creditors.

Typically, one of the assets liquidated by the bankruptcy trustee is the debtor's underwater home. However, in recent times, the trustee has no interest in the property because it has no equity. Thus, after the debtor's obligations to its creditors is discharged and the bankruptcy case is closed, the debtor is still responsible for the expenses related to the property that come due after the filing of the bankruptcy petition, such as insurance, taxes and homeowner's association dues. Many times, a debtor who has received a Chapter 7 discharge may be able to purchase another home several years after receiving a discharge, but until the abandoned underwater property is sold, the dream of owning another home cannot be realized.

After a borrower has obtained a Chapter 7 discharge, many lenders fail to start a foreclosure on a debtor's abandoned property because the process can be expensive and for any number of reasons some lenders fail to carry through with the process. Often the low value of the house may make it not worth the lender's effort to do so. This leaves the house abandoned and the debtor still tied to a property that contains no equity. Debtors that gained a discharge through Chapter 7 may still have obligations holding them down.

Many homeowners do not realize that even after bankruptcy, they still have obligations related to their underwater properties. Since they still own the abandoned property, that tie to the old home holds many of them back when they attempt to purchase a new homestead property 3-4 years down the road.

Pursuing a Short Sale

Our firm seeks to break this connection through pursuing a short sale after a Chapter 7 discharge has been obtained, to free debtors from the responsibility related to their underwater property and to allow them to finally gain a sense of closure. A short sale allows a debtor to sell the home for less than amount that is owed on it. With the Chapter 7 discharge already in place, a borrower can complete the short sale and be assured that the lender will not pursue a deficiency judgment.

One of the greatest benefits provided through a short sale after completing a Chapter 7 Bankruptcy is that you can finally move past this long drawn out issue that has more than likely been a constant burden for an extended period of time. In many instances, a borrower who has received a Chapter 7 discharge can receive a short sale incentive payment from the lender as compensation for their cooperation in selling the underwater property. For many, financial debt is something homeowners want to forget and when the tie remains to the old underwater property it can be a constant reminder of the problems of the past.


Contact a Sarasota short sale lawyer for more info and to find out how they can help.


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