Is Bankruptcy the right solution for a homeowner facing foreclosure or in financial distress with their mortgage? Is Bankruptcy better than a Short Sale? What if I’m in foreclosure, should I file for bankruptcy? I get this question asked during my seminars all the time. First, I’m not an attorney, so I never offer legal advice. But I always refer them to my strategic alliances with Bankruptcy Attorneys. But I do address this question because it does affect the closing process if the homeowner is considering a Short Sale.
If the homeowner files for bankruptcy and the property is in the process of a real estate closing transaction including a short sale, this will halt or delay the closing process. It is one of those other “moving parts” that I describe in my seminars that make the business of short sale so difficult. It takes endless hours and frustration to get a short sale approved by the lenders only to find out that the seller/homeowner files for bankruptcy in the midst of the transaction. In order to come to a final closing, the bankruptcy has to be discharged or the property needs to be released from the bankruptcy proceedings. This will take additional weeks to obtain. This will cause more extensions to be requested from the short sale lender and most likely the buyer will walk-away from the transaction. Meaning, we have to start all over again with a “hopefully” new buyer and begin the short sale process again. Wheeewwwww!!! But, its still possible to come to a successful closing, but many weeks and months will have to be dedicated to the transaction.
I came upon this article which address the bankruptcy issue. It offers valuable information and some guidelines. Although Bankruptcy is a Federal proceeding, State laws also need to be considered and how it affects the real estate process. Read this very interesting article on Bankruptcy here: Using personal bankruptcy to prevent foreclosure - Jul. 21, 2010
