Short Sale Blog

Click here to download our Special Report: Combining Short Sales and Bankruptcy for Total Relief.

...The old adage, "If the only tool you have is a hammer, everything looks like a nail" completely applies to the world of distressed real estate. Too often, homeowners in financial trouble will consult with a real estate agent, a real estate attorney and a bankruptcy attorney and get three completely different prescriptions.

Sell!
Foreclose!
File Bankruptcy!

When you are faced with potential financial liabilities that number in the tens or hundreds of thousands of dollars, a limited or biased approach to solutions can be catastrophic.

Here is an example: A homeowner has two liens. The first lien is for $350,000 and the second lien is for $100,000. The housing market crash has reduced the value of the property to only $325,000. The homeowner simply can't make both mortgage payments any longer and needs advice.

The real estate attorney might recommend letting the property simply go to foreclosure. However, this will result is the junior lien holder being wiped out at the foreclosure auction, enabling them to pursue the borrower for the $100,000 owed.

The real estate agent might recommend selling the property and doing a short sale. This could work, but may still result in a situation where the junior lien holder preserves their deficiency rights for up to six years.

What is one possible creative solution? Do a short sale, followed up immediately by a Chapter 7 bankruptcy. This step will remove the possibility of the junior lien holder coming back years later looking to collect on the $100,000.

Another creative solution: File a Chapter 13 and strip the junior lien off of the property. This converts it from a secured lien to an unsecured lien. Then, convert the bankruptcy filing from a Chapter 13 to a Chapter 7 and completely wipe out the second lien note. Possibly do a loan modification on the remaining first lien, and keep the house!

As you can see, once you start combining disciplines, the possibilities for a pro-active, creative solution increases immensely. In order to help you understand some of your options, Seattle Short Sales, Inc. in conjunction with Jonathan Smith, Attorney at Law, have written the ultimate guide to the intersection of short sales and bankruptcy.

Click here to download our Special Report: Combining Short Sales and Bankruptcy for Total Relief.

For personal help, please call our office at 800-603-3525.