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Ask WALLSTREETESQ Your Own Question
Category: Bankruptcy Law
Satisfied Customers: 17252
Experience:  14 years exp., CH 7 AND 13 Bankruptcy cases, AFL-CIO UNION PLUS, UFT NYSID AND ALL MAJOR UNIONS
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If a house is short sold and the lender does not relinquish

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If a house is short sold and the lender does not relinquish his right to persue a deficiency judgement (DJ) but you file a chapter 7 before the lender pursues his DJ then it appears that the chapter 7 filing can not protect you from the terms of the prior loan because at the time of the filing of the chapter 7 the DJ was only a legal threat and not an actual debt that could be discharged. Any comments? Is this correct reasoning? Wouldn't a chapter 7 be advisable to take care of 'potential" DJ which may be filed for in the future?
if in the chapter 7 they listed the mortgage as a creditor and the court discharged the debt they cannot seek a judgment against you. Also, if the case was recently discharged, the debtor can reopen the bankrtuptcy and include the judgment into the prior bankruptcy
Customer: replied 7 years ago.

The Chapter 7 filing would not necessarily list this particular creditor because official business with them would have been legally finished by the short sale.


The only thing pending would be whether they would pursue a deficiency judgement in court at a later date on the short sale. They have 5 years in Virgina to do that! The concern is that they will pursue a Deficiency Judgement 4 1/2 years after the chapter 7 has been filed therefore making the chapter 7 filing not able to protect you from this particular creditor and the consequences of this particular loan. Can a bankruptcy judge pre-empt potential lawsuits that have not yet been (the future deficiency judgement) by declaring it part of the current liabilities even though Bank of America has not chosen to persue it as yet? Settling the short sale would open one up to potential a deficiency judgement on the short sale in the future - not in the present but it appears that the chapter 7 only deals with the recent present.


that is not correct, as they may have a pending suit against you for the judgment listing them is proper, regardless of the house was sold already. If the property was sold six to 12 months prior to the filing, he would have had to list the property anyway.

You have to list the judgment.
Customer: replied 7 years ago.

Do not understand, specifically: 1) If I file bankruptcy TOMORROW and Bof A gets a deficiency judgment later in 4 years DUE to the short sale completed TODAY, Can this bankrutcy filed TOMORROW protect me from this FUTURE possible judgment fthat BoA is not saying today that they will pursue ? Is it legal to add This potential future judgement to the bankruptcy filed today?


IE; bank could suit me in the future (beyond 12 months up to 5 years), does a bankruptcy today protect me from the future rights of others to sue/


Yes, once you list Bank of America, as a creditor they will no longer have any claim against you. They cannot circumvent the bankruptcy rules by doing that, it is a violation of federal law. A bankruptcy filing will protect you from any suits in the future that the actions started at this time. If the house was sold recently, the action has to be listed and bank of america listed, you would state that BOF you owe the remaining balance to them on your creditors list., if you know the number.
Customer: replied 7 years ago.

Thank you for the answer, last question:and will click accept. If BofA exercises its mortgage protection insurance thru a third party and the third party comes after me in 4 years, How do I protect myself from this 3rd. party? What can I do to avoid BofA sell/transfer/use that credit to others? Do you file something against BofA?

Thanks much

it would not be valid, as the BOF discharge from the court invalidates any subsequent actions they may make. When you do file the bankrutpcy make sure you list all parties involved in the transaction. Remember bankruptcy is federal law and takes precedence over any state actions they may file.
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