Bankruptcy—Effects on the Short Sale
admin | Jan 12, 2009 | Comments 18
One thing to remember if you are considering bankruptcy, it will only postpone the foreclosure. A bankruptcy creates a stay, which stops all litigation. While it is true the property cannot be foreclosed while in bankruptcy, once you come out you will lose your home.
Your probably filing either chapter 7 or 13. Chapter 7 is a total liquidation while a 13 is a repayment plan.
If the house is included in the chapter 13 bankruptcy, it can be sold with the permission of the court, especially if it is determined there is no equity. Remember the only way to save your home through bankruptcy is through a repayment plan in chapter 13, and that is if and only if you make all of the trustee payments, including the mortgage. Now the success rate of this is about 3%.
This is a huge and complicated decision, and depending on the circumstance can be a wise and calculated move. The best option is to short sale the house, remove the debt, and potentially avoid bankruptcy all together. I’ll speak about this more in future posts.
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