Short Sale After Bankruptcy

Paul:

I am in a trial modification with CHASE, ending April 2010. Payment in trial mod ok, but not sure about after that.  I am filing Chapter 13 bankruptcy the same month to strip my second mortgage and protect against an investment property that was foreclosed on. 

I would like to know if we can still pursue a short sale after we file, which is of interest to us after reading about the changes supposed to go in effect April 15th.  We are upside down $75000.00 in our house. 

We are trying to minimize the hit to our credit for when we want to buy another home down the road.  Is there any difference in trying to sell, or should we give the house back in the bankruptcy?

Thank you for all the useful information we have found on your site!

Jason

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Hello Jason,

The tradeline is required to be frozen at the time the bankruptcy case number is assigned.  This means that it should not report any further late payments after that date.  However, there is also a public records section for a credit report which is separate from the tradeline and this is where a completed foreclosure is noted.  For this reason, settling a debt through a short sale is generally preferred to a foreclosure even after the debtor has declared bankruptcy.

The program you’ve described that goes into effect this month is the Home Affordable Foreclosure Alternatives (HAFA).  I should write a separate article about it, but suffice it to say that it will probably work about as well as HAMP, HARP, and all of the Obama initiatives to date. 

Thanks for the questions and hope this helps.

Paul

This author is not an attorney and this information should not be considered legal advice.  Please consult an attorney for legal advice.