???? How will a Chapter 13 filing effect a short sale ?????

So first of I want to clearly state I do not offer legal advice with regards to any bankruptcy filing. You should consult an attorney and see how your situation is effected by a bankruptcy filing.

I have successfully closed a couple of short sales where the home was either in the process of a Chapter 13 filing or the home owner was finishing up with Chapter 13 payments. Both situations caused delays in closing a short sale and could potentially could put your home in risk of being foreclosed if not handled correctly.

Both of these situations involved a second loan on the property. To successfully close a short sale with two loans you need to have agreement from both lenders to successfully short sale your home. The first lender really is not concerned with the second lender and typically are only looking out for their interest in the property. I believe most lenders these days would prefer a short solution over foreclosing but if they feel a short sale is not working or taking too much time they will proceed with foreclosing. When this happens the homeowner is left to deal with the second lender and there are not any easy solutions left.

If you have started a Chapter 13 process you can still move forward with a short sale but the loan has to be removed from the Chapter 13 process. To do this the second lender has to be shown that they are getting something from the short sale. If they do not believe the short sale will get them anything they do not have to accept a short sale solution. If this process takes too long there is the possibility of the home being foreclosed as you cannot always get an extension. Fannie and Freddie backed loans will typically only give you so much time and then they will not give an extension even if there is a valid offer (Yes I know this stinks!). Your attorney will be required to file a motion to sell with the court. You will also need to have short sale approval from the 2nd lender as this may be needed by the court.

So in closing it is possible to short sale your home if the Bankruptcy process has started but it is important to let your attorney know your intentions on short selling your home so they can plan and advice you accordingly.

So once again I want to clearly state I do not offer legal advice with regards to any bankruptcy filing. You should consult an attorney and see how your situation is effected by a bankruptcy filing. These are just experiences I have had while processing short sales and by no means reflect your situation. Only your attorney can make the best recommendation for your particular situation.