Comments on: Short Sales or Foreclosures: Which is Better? http://www.bklaw.com/bankruptcy-blog/2008/09/short-sales-or-foreclosures-which-is-better/ Bankruptcy issues, articles and thoughts by attorney Mark J. Markus Tue, 06 Sep 2011 02:33:05 +0000 hourly 1 http://wordpress.org/?v=3.3.2 By: simplelaguna http://www.bklaw.com/bankruptcy-blog/2008/09/short-sales-or-foreclosures-which-is-better/comment-page-1/#comment-46 simplelaguna Wed, 17 Mar 2010 19:17:43 +0000 http://bklaw.com/bankruptcy-blog/?p=21#comment-46 Thanks, I also came across another interesting article at: http://www.lonestarlandlaw.com/Deeding-Property.html where it talks about just deeding a property back to the lender (not deed in lieu). Have you come across this or do you know of any cases in California where this has been done? As if a person had discharge from their Chapter 7, I am trying to determine if this would be an option for them and what / if any ramifications there could be? Thanks, I also came across another interesting article at: http://www.lonestarlandlaw.com/Deeding-Property.html where it talks about just deeding a property back to the lender (not deed in lieu). Have you come across this or do you know of any cases in California where this has been done? As if a person had discharge from their Chapter 7, I am trying to determine if this would be an option for them and what / if any ramifications there could be?

]]> By: Mark Markus http://www.bklaw.com/bankruptcy-blog/2008/09/short-sales-or-foreclosures-which-is-better/comment-page-1/#comment-44 Mark Markus Fri, 26 Feb 2010 23:09:36 +0000 http://bklaw.com/bankruptcy-blog/?p=21#comment-44 This is a very complicated area of law and related primarily to taxation issues post-bankruptcy. The timing of the bankruptcy case in relation to whenever a sale takes place (whether it be foreclosure, short sale, or regular sale) can be very significant, particularly where the debtor owns multiple properties. It has to do in part with the debt being converted from non-recourse to recourse, and capital gains issues which can also flow from the sale. The short answer is that you need to consult with a tax attorney who has knowledge of bankruptcy to get a complete answer to your question. Your assumption in #2 is correct: a discharge in bankruptcy eliminates the obligation of the debtor to pay on the mortgage debt(s) but the liens remain against the property. But again, the timing of when the bankruptcy is filed in relation to said sale can be critical. (there is also the issue of the debtor/taxpayer using the "short year election" for their taxes). If the lender never forecloses, then there is no sale and no taxable event, to my knowledge. This is a very complicated area of law and related primarily to taxation issues post-bankruptcy. The timing of the bankruptcy case in relation to whenever a sale takes place (whether it be foreclosure, short sale, or regular sale) can be very significant, particularly where the debtor owns multiple properties. It has to do in part with the debt being converted from non-recourse to recourse, and capital gains issues which can also flow from the sale. The short answer is that you need to consult with a tax attorney who has knowledge of bankruptcy to get a complete answer to your question.

Your assumption in #2 is correct: a discharge in bankruptcy eliminates the obligation of the debtor to pay on the mortgage debt(s) but the liens remain against the property. But again, the timing of when the bankruptcy is filed in relation to said sale can be critical. (there is also the issue of the debtor/taxpayer using the “short year election” for their taxes). If the lender never forecloses, then there is no sale and no taxable event, to my knowledge.

]]> By: simplelaguna http://www.bklaw.com/bankruptcy-blog/2008/09/short-sales-or-foreclosures-which-is-better/comment-page-1/#comment-43 simplelaguna Fri, 26 Feb 2010 20:36:17 +0000 http://bklaw.com/bankruptcy-blog/?p=21#comment-43 Hi there, in the above article you note that "the optimal strategy is that if you are going to file a bankruptcy, it is usually best to allow your property to go to foreclosure, and file your case before the foreclosure sale takes place" Questions: 1. Can you elaborate on the benefits or reasons to file Chapter 7 before a foreclosure is completed? 2. I understand that in chapter 7 the underlying notes are wiped out with discharge, but the mortgage liens remain. If this situation, would you just walk away from a house in California (note: house was in construction and only 90% complete) and let the bank foreclose or try to shortsale? Also, what if the lender does not take any action to foreclose? Hi there, in the above article you note that “the optimal strategy is that if you are going to file a bankruptcy, it is usually best to allow your property to go to foreclosure, and file your case before the foreclosure sale takes place”

Questions:
1. Can you elaborate on the benefits or reasons to file Chapter 7 before a foreclosure is completed?

2. I understand that in chapter 7 the underlying notes are wiped out with discharge, but the mortgage liens remain. If this situation, would you just walk away from a house in California (note: house was in construction and only 90% complete) and let the bank foreclose or try to shortsale? Also, what if the lender does not take any action to foreclose?

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