After you go through the legal process of wiping out your debts and getting a fresh start, you will usually keep your property. If you no longer want to keep it, a short sale can be a practical way to get yourself off title and avoid further liability (as a property owner) for taxes, HOA fees, or injuries on the land. As a property owner, you may have continuing liability to people who are injured on your land. Also, if the house is situated within a community that has a Homeowners Association (HOA), you will continue to be liable for HOA fees after bankruptcy as long as you are on title to the property and ultimately will receive an HOA lawsuit which you cannot file bankruptcy to get rid of, because the law places limits on how often you can file and eliminate your debts.
How to do a Short Sale After Bankruptcy in San Diego
How to do a short sale after bankruptcy in San Diego, depends on whether you filed a Chapter 7 or Chapter 13 case. If you filed a Chapter 7 case, you can generally proceed with a short sale just as if you had never filed for bankruptcy, provided you wait until the trustee abandons any interest in your property. If you filed a Chapter 13 case, which generally takes 3 to 5 years to complete, your lawyer will have to obtain a Court order allowing the sale. An experienced attorney should have no problem obtaining such a court order for you.
Short Sale a House after Chapter 7
If you file for Chapter 7 in San Diego, your house is generally treated as if you never filed for bankruptcy. This assumes that the equity in your property does not exceed the amount allowed by your exemptions, and if you are considering a short sale, then by implication you do not have any equity at all in your house. If you stay current on your mortgage payments, you will continue to be the owner of your home, subject to a mortgage. If you fall behind on your payments, your mortgage lender will foreclose, similar to the case as if you had never filed for bankruptcy relief. After you file a Chapter 7 case, the trustee will abandon any interest in your property, since you have no equity in it. Once the trustee abandons any interest in the property, you can do a short sale whenever you want to do it.
Short Sale After Chapter 13
When you file a Chapter 13 in San Diego, you must decide, and affirmatively tell the Court, whether you want to keep your house, or give it up. If you want to keep your house, then your attorney will draft a Chapter 13 plan in which you will repay all of your missed mortgage payments over a 3-5 year period. Also, you will need to resume making your regular monthly mortgage payment as well. If you want to give up your house, then your lawyer will inform the court of your decision and you don’t make any more payments and your lender will foreclose on your property. To do a short sale during your Chapter 13 case, your lawyer will obtain the Court’s approval to do the short sale. Your lawyer can do this by obtaining the trustee’s approval and then the Court will sign an order based on the trustee’s approval. Alternatively, your attorney can file a motion and go directly to the judge and request approval of the sale. After your chapter 13 case is concluded, you can do what you want with your property, just as is the case after the trustee abandons property in a Chapter 7 case.
Trustee Will Not Want Property With No Equity
If you don’t have any equity in the property, which will be the case if you are considering doing a short sale, then the property cannot be liquidated (sold) to generate any money to pay creditors. Therefore, the trustee won’t have any interest in the property. The only exception would be a property that generates positive cash flow. When the trustee has no interest in your property, obtaining the Court’s approval serves mostly to ensure that you are not personally profiting from the sale. If you are somehow profiting from the sale, the Court won’t necessarily disapprove of the sale, but it might require you to pay some or all of the profits to your creditors. So if you need to short sale of your house after bankruptcy, in most cases you can. With the help of a good bankruptcy attorney to guide you through the process, you can successfully do a short sale after bankruptcy.