Murrieta, CA asked in Bankruptcy for California

Q: Can you short sale a home during Chpt 7 Bankruptcy?

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1 Lawyer Answer
Ute Ferdig
Ute Ferdig
  • Newcastle, CA
  • Licensed in California

A: Yes, you can do a short sale while a chapter 7 bankruptcy case is pending, but the bankruptcy court has to first grant a relief from the automatic stay. While the lender can file a motion for relief from the automatic stay, it is unlikely that the lender will do so to make a short sale possible. They don't want to incur any more expenses than absolutely necessary. Banks usually file a motion only to be able to proceed with the foreclosure. If you want to short sell and you don't want to wait until after the chapter 7 discharge, you or your attorney have to file the motion for relief from the automatic stay which releases the property from the bankruptcy estate. It only makes sense for you to do that if you are absolutely certain that the lenders are willing to work with you on a short sale because once the relief from the automatic stay has been grantedm, the bank is no longer barred from proceeding with the foreclosure if you are in default.

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