Can you short sale while in Active Bankruptcy?
Can you do a short sale with Wells Fargo while in Active bankruptcy?
Replies to This Discussion
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Permalink Reply by Jeff Payne on
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Yes, the BK judge will need to approve. I have done several and never had any pushback from the BK judge
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Permalink Reply by Mike Rosania on
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What if a Chapter 7 which has no repayment plan?
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Mike, while I am not a BK attorney and don't have alot of experience, regardless of 7 or 13, there is still a mortgage being held by the lender. I can't imagine why a BK judge would not allow the short sale. Maybe someone with more experience will answer this.
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Thanks Jeff, you always seem to be helpful and it is appreciated.
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Permalink Reply by Wendy Rulnick on
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Cherrie - The seller must disclose his short sale to his attorney and bankruptcy court. I would not just proceed without full disclosure to all parties.
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Permalink Reply by Eric Mieles on
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Yes Jeff is correct. The bank will need certain documents from the trustee in order to review the short sale and issue an approval.
This is such a sore subject with me because we have all tuxes BK attorneys pitching BK and homeowners for some reason seem to think once there discharged they won't suffer a foreclosure or they can stay in there home forever.
A lot of attorneys are hurting homeowners but because of there title they seem to get away with it.
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Permalink Reply by Thom Colby CA Brkr 888-391-5245 on
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The lender will request the property be removed from the BK Estate in order for it to be disposed of. After that happens, you will be able to proceed.
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Permalink Reply by Ben Mills on
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Yes, your listing AND contract should specifically say subject to court approval.
It will most likely take several additional weeks because the court will not approve the short sale without an approval from the lienholder first. Once you do have the lienholder approval, the BK attorney will need to set a date with the court where the case is heard which could take two weeks. After the judge rules, the trustee of the bankruptcy court will need to sign off on it which could take another 10 days.
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Permalink Reply by Dana Harris Carter on
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Hi Cherrie! I am a Preforeclosure/Bankruptcy/Fraud Specialist of 15+ years. The first thing I suggest is that you ALWAYS include the following stipulation in your offer, as follows: "This offer is contingent upon the final approval of the seller's lender and/or the U.S. Bankruptcy Court due to the anticipated shortsale request." That way if anyone denies the shortsale your seller is legally protected from a "breach of contract." To answer your question you would, in fact, need the approval of the U.S. Bankruptcy Courtl. However, herein lies the problem. The courts could take a few extra months to render a decision and you would risk losing the prospective buyer who may not want to renew the Purchase and Sale agreement. To be frank with you out of the hundreds of shortsales that I have completed during my tenure I only went through the Bankruptcy Court one time. After experiencing all of those delays, drama and trauma I never did it again. I simply wait until their Bahnkruptcy is is either discharged (approved) OR dismissed (they are kicked out if they change their minds or simply filed "temporarily" to stop the foreclosure as some will do when they file pro se (represent themselves without an attorney). Then I go ahead and either list the property at that time because you don't have to get the courts permission. Remember the courts don't have the authority to dictate to the lender on what type of shortsale to accept. All they can do is authorize the sale of the property. Therefore, you can find yourself in a catch 20/20. The other most important thing to remember is that the courts have the right to REMOVE you as the Realtor of record and require the seller to use a court appointed Realtor of their choice whom they are used to working with on these type deals. I remember losing a listing for that reason. Therefore, keep in mind that when you are listing a property that is in bankruptcy that you get the legal document that exists to request that you be approved to handle the listing/sale of the property while in bankructy. Hence, now you understand why I do NOT go through the courts any longer and simply explain to the seller we can list the property for sale (without the courts approval). However, we cannot close without their approval which is why I try to slow down the shortsale process until their bankruptcy is approved. It's a matter of timing to be frank. I won't reduce the price to the point that I know it will sell until it's out of bankruptcy. Keep in mind that they are protected from foreclosure in the interim unless/until there is a motion to "lift the stay" which means that the lender has requested the courts to take the property out of bankruptcy protection while the seller is going through bankruptcy for the explicit purposes of allowing them to start the foreclosure proceedings. Nevertheless, if you go through the bankruptcy system you MUST let the seller's bankruptcy attorney make the official request to sell the property and have them guide you through the process. As you can see it's not that easy of a decision to make and I've had a lot of experience with bankruptcy preforeclosures. I hope I didn't confuse you. Good luck :-)
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Permalink Reply by Wendy Smith on
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Question:
If a person short sales his house, then files CH13 and includes the deficiency from the short sale in the bk, is the deficiency amount included in the repayment plan?
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Permalink Reply by Paul Antonelli on
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I agree with DANA, every one I have done the lender always asked for the Bankruptcy discharge paperwork. You'll be surprised how fast you get an approval after you supply that.
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Yes, with approval from the judge. I work closely with the BK attorney when doing these. So they will lead you in the proper direction and give you the guidance you need to navigate it w/ the courts/banks.
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