Grand Rapids Short Sale Attorney

Understanding the Pitfalls of Short Sales

A short sale is when a mortgage company gives a homeowner permission to sell the house at a reduced price, without paying the full amount owed. While it sounds like a preferable arrangement, especially for those facing foreclosure, short sales can actually be highly complex and troublesome for the homeowner.

Some of the pitfalls of short sales include:

• The mortgage company requires the homeowner go through multiple steps with no real promise that the short sale will be approved.
• Short sales are a possible tax liability. The debtor may be required to pay income tax on the deficiency. A large tax bill from the IRS may result from a short sale in many cases.
• The debtor may be responsible to make up the difference between the unpaid mortgage and the price the house sold for. The end result may be that there is a very large debt still owed on the home after the short sale is completed. Bankruptcy may be a better option either before or after a short sale.

For these and other similar reasons, many people find that bankruptcy is the better option for mortgage debt relief.

The Benefits of Bankruptcy

Bankruptcy is a court procedure that either cancels most debt completely (Chapter 7 ), or reorganizes it into a creditor repayment plan (Chapter 13 ). Either chapter of bankruptcy places an automatic stay on all creditor actions, including foreclosure. Whether you actually keep your house depends on your financial situation and the chapter of bankruptcy you file.

Chapter 7 cancels debt and generally results in debtors giving up their house if the debtor cannot make the payments and wants to cancel the debt. In other cases, a chapter 7 debtor may keep the house and reaffirm the debt or seek to modify the loan with the lender. If the home is surrendered, the debt is cancelled. This allows them to walk away from the payments without the negative repercussions of a short sale.

In a Chapter 13, debtors consolidate debt into a single affordable payment. The reorganization often reduces debt enough that the debtor can afford the mortgage on the house and can make up past due payments. Debtors can keep their home so long as they continue to make the payments of the chapter 13 plan.

Contact an Experienced Bankruptcy Lawyer

The attorneys at the law offices of David Andersen & Associates, P.C., are board certified in consumer bankruptcy law. We will explain the pitfalls of short sales and explain the benefits of bankruptcy in your situation. If you decide that bankruptcy is the best option in your case, we will determine the chapter of bankruptcy you should file according to your financial position and debt relief needs.

Contact our offices today at 616-784-1700 to schedule a free initial consultation. Evening hours are available by appointment.

We are a debt-relief agency helping people file for bankruptcy relief under the Bankruptcy Code.