QUESTION
Does the bank have the right to expose her to a deficiency judgment if they cooperate in the short sale?
Asked on Apr 01st, 2011 on Bankruptcy - Indiana
More details to this question:
My client went through a bankruptcy and elected to abandon her home since there was negative equity. The bankruptcy was discharged. The bank began foreclosure. She moved out of the property. I spoke to her about a short sale. Does the bank have the right to expose her to a deficiency judgment if they cooperate in the short sale?
2 ANSWERS
I am confused how her home could have been discharged through bankruptcy yet you still are trying to do a short sale. When real property is surrendered during bankruptcy the bankruptcy court considers the debt discharged because the collateral was given back to the secured note holder. The bank will issue her a 1099, but form 938 should have been given to her by her bankruptcy attorney, which is the exemption due to bankruptcy. She cannot work with the bank to conduct a shortsale.
Answered on Apr 07th, 2011 at 8:46 AM
If she surrendered the home through bankruptcy, her liability on the note is discharged and any cooperation in a short sale is voluntary.
Answered on Apr 04th, 2011 at 9:24 AM