A short sale refers to when you sell your house for a price that is not sufficient to pay off all of the loans against your property. When you sell your home, you have to pay off the existing loans against your house so that your lender will release the loans against your property. The terms "short" sale refers to the selling price, or proceeds of sale, coming short of paying off the existing liens. In most cases, you can sell your property and proceed with a Chapter 7 or Chapter 13 filing at the same time. In many cases, you will need to file in order to stop foreclosure of your property so that you can wrap up the sale, and eliminate credit card debt and other unwanted debts.
Short Sale and Bankruptcy in San Diego
If you need to file bankruptcy, it usually will not disrupt the short sale process. If you want to close the sale while you are still in an active Chapter 7 or Chapter 13 case, you can. You will need the approval of the Court and the Court appointed trustee overseeing your case. The Court will usually agree to a sale if the trustee is in agreement to allow the sale to go forward. The trustee will usually agree, assuming that there is no equity in your property over and above your exemptions, since in that case the trustee will not have any interest in your property. If you are doing a short sale, it necessarily means there is no equity in your property. Hence, your property will not be of any value to the Court or the trustee.
Why Do a Sale if Filing Bankruptcy?
So why would you ever want to do a short sale of your home if you are filing bankruptcy? Well, surprisingly to many people, there is a very important reason you would want to consider, and it has to do with your HOA and the ability to prevent potential future liability to your HOA for many years going forward. The sale of your property to a third party (anybody) will help avoid liability for HOA fees after bankruptcy by transferring ownership of the property out of your name. Under California law, after you file bankruptcy in San Diego, as long as you remain on title to your property you are liable for HOA dues. After bankruptcy, it is very common for HOAs to simply sit back, let HOA fees accrue for a couple of years, or more, until your lender forecloses on your house. Once your lender forecloses, the HOA will then file an HOA lawsuit against you to collect the unpaid HOA fees. This is actually quite a common occurrence in San Diego. If you own a property governed by an HOA, you'll want to do a short sale after bankruptcy to stop accruing liability for HOA dues.
Broker Commission and Moving Costs
Another reason you may want to do a short sale after bankruptcy in San Diego is so that you and your broker can receive some sort of compensation (money) from the sale of the property. Many lenders will pay for your moving cost in addition to the broker commission that is customary when you sell real estate in California.
When You Don't Qualify for Bankruptcy
What about cases where bankruptcy just is not an option? In such cases, a short sale will look better on your credit report than a foreclosure. If you do not qualify for bankruptcy, then your lawyer may advise you to do short sale of your house to prevent a foreclosure from taking place. That way, your credit will show a short sale instead of a foreclosure. Both are bad marks on your credit, but most bankruptcy lawyers would agree that a short sale does not look quite as bad as a foreclosure.
To short sale your home, either before, during, or after bankruptcy, you will need the guidance of an experienced lawyer. Selling your home in bankruptcy is a specialized proceeding that requires the knowledge, skill and experience of a San Diego bankruptcy lawyer who has handled precisely these types of sales before. If you are considering doing a short sale of your home, contact Bankruptcy Legal Center today. Talk to an experienced lawyer about your situation.