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Terry L.
Terry L., Attorney
Category: Bankruptcy Law
Satisfied Customers: 2820
Experience:  Better Business Bureau. 18yrs bankruptcy experience. Chicago Bar Assoc. American Bankruptcy Institute member.
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Am trying to do a short sale on a home I am about 80k upside

Resolved Question:

Am trying to do a short sale on a home I am about 80k upside down on. The bank has not agreed to forgive the balance, but will expect me to sign a deficiency document of some sort. If I do a voluntary surrender can I then declare chapter 7 bankruptcy to have the remainder lifted off of my shoulders. I currently make well under 35k per year as a foreign mission worker in India. The question is basically does the sale of the house or if it were voluntarily surrendered or forclosed on does the debt then become unsecured and therefore subject to chapter 7 liquidation?
Submitted: 6 years ago.
Category: Bankruptcy Law
Expert:  Terry L. replied 6 years ago.

Terry L. :

Hi and thank you for your question. In the future, you can request me to answer any further questions.

Terry L. :

If you have other debt, then the bankruptcy may be the best option.

Terry L. :

Any amount that they forgive would be taxable as income to you, but it doesn't sound like they want to do that.

Terry L. :

If they force you to accept a deficiency, it should be discharged in the case.

Terry L. :

If you sign the contract while insolvent, and don't disclose your intent to file, then they could object to discharge in your case.

Terry L. :

If you don't sell and just file ch7 and discharge the debt, there would be no deficiency balance to collect on.

Terry L. :

Therefore, that may be the best option, and don't worry about trying to sell.

Terry L. :

foreclosure will transfer the title.

Terry L. :

You would be responsible to keep the home in good repair until then.

Terry L. :

If it has association fees, you would owe them despite bankruptcy from the date your bankruptcy was filed until the foreclosure though.

Terry L. :

You can also live there rent free/mortgage free until the foreclosure completes too.

Terry L. :

hope that helps.

Terry L. :

Good luck.

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