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Can I File For Bankruptcy And Also Do A Short Sale To Help My Credit and Avoid a Foreclosure?

October 3, 2013 By Leave a Comment
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sacramento short sale

It is possible to get the relief you need from your creditors by filing for bankruptcy and then avoid having both a bankruptcy and a foreclosure on your credit report by then doing a short sale.  If you are still in your home you also then have the possibility of getting relocation incentives in order to help with moving costs.  Many of our bankruptcy clients file for bankruptcy and then choose to do a short sale over foreclosing.  There are many reasons for bankruptcy and short sale as we will explain below.

How Does Bankruptcy Affect The Foreclosure Process?

If you want to save your house, bankruptcy may be the answer. Filing causes an automatic stay to occur, meaning that creditors must stop collection activities while the bankruptcy is pending.

Chapter 13

Filing a Chapter 13 bankruptcy may allow you to pay off the missed payments over a period of three to five years. It can also eliminate your second (and 3rd) mortgages if the value of the home is below what is owed on the junior liens.

Chapter 7

Filing a Chapter 7 will allow you to live in the home without having to make mortgage payments while your case is being processed. You can use these savings towards obtaining new living arrangements. Chapter 7 cancels all personal liability you may have on debts secured by your home – meaning your mortgages and any home equity lines of credit. However filing a Chapter 7 cannot cancel the foreclosure indefinitely because although the debt is no longer your personal responsibility, the bank still has a lien on the property as collateral for the loan. The only way to resolve the lien is for the lender to get the property back.  They will be able to do this by asking the bankruptcy Judge for relief from the automatic stay, which typically the Judge will grant, the bank will then be able to foreclose on your home.  This is not the case with a Ch. 13.

Credit Impact of a Short Sale vs. a Foreclosure

The negative credit impact of a short sale is much less than that of a foreclosure and as such is preferred over a foreclosure for many reasons. A short sale will not appear as a public record foreclosure on your credit report which will stay there for 7 to 10 years, and therefore only the previous delinquency from your missed payments on your mortgage will appear. Most mortgage lenders once the short sale has closed will report the loan as “paid in full for less than the full balance.”

Experienced Bankruptcy and Real Estate Attorneys

We can help you file for bankrupcy and we can also assist you with a short sale, both with the legal negotiations and review and with listing your property for sale through our in-house affiliated brokerage, StoneCrest Realty.

We are experienced Sacramento Bankruptcy Attorneys and Sacramento Real Estate Attorneys and Realtors. We have helped thousands of individuals and businesses get the relief they need from their creditors through the use bankruptcy by filing a Ch. 7, Ch. 13, credit card debt negotiation, debt settlement or short sale and have successfully dealt with adversary proceedings brought by difficult creditors.  Our bankruptcy and real estate attorneys have achieved proven results and can give you the great legal advice and strategy needed to get you the results you want.  Contact us today to schedule your complimentary attorney consultation by clicking HERE or by calling 916-999-1376. We look forward to helping you with all of your Sacramento bankruptcy and Sacramento real estate needs.

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Attorney, Broker, CEO
A licensed California Attorney, Sacramento Realtor and co-founder of StoneCrest Realty. StoneCrest Realty is a full service residential and commercial real estate brokerage. In addition to the brokerage, she is the founding attorney of StoneCrest Law Firm. Her practice centers on transactional real estate work. She represents developers, investors, and individual buyers and sellers and their funds in a wide range of matters including acquisitions, dispositions, development, leasing, financing, short sales, general real estate transactions and foreclosures. Her clients range from individuals, investors, corporations, and institutions across all asset classes of real estate, including residential, multi-family and commercial. Contact her by calling 916.999-1376. Attorney at StoneCrest Law Firm, Broker at StoneCrest Realty. DRE License # 01704912.
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