Should I SHORT SALE my house eventhough I filed CHAPTER 7

[dirkdigler]

Hello Everyone.

I filed for chapter 7... 9/30/10 and had my 341 meeting on 11/03/10 and set to be discharge 1/03/11. pacers says no distribution.

My uncle really wants me to short sale my house, I surrendered the house already on the bankruptcy, so I really dont own the house. He says because I owed 410k on the house and if it sells for under 300k I would not be in the hook with the bank for the diference and the IRS would not 1099c me because I did not make any money from the sale.

is this true? is it dangerouse, could the IRS come after me?

I really dont want to do the short sale, but my uncle I guess wants the commision from the sale (I know his hurting for business).

what do you guys think?


THANK YOU FOR YOUR TIME.

[IBroke]

As far as I know, you shouldn't face any tax-issues because you didn't gain any money by doing a short-sale. Why? Because no debt was forgiven. The debt was already included in bankruptcy, so the lender can't "forgive" you a part of a debt you don't owe. Another nice side-effect of BK. A short-sale AFTER the BK would have a positive affect for you as well: Your credit won't be hit with a foreclosure-notation on your Public Record.

[tcreegan]

Hi dirkdigler,

Once you get discharged you don't face any IRS 1099 tax, the debt was discharged so nothing was 'forgiven'

Between filing and discharge...not sure

Since the house is part of the BK estate, any sale has to have approval from the trustee but the trustee will only sell the house if it produces cash for the estate, which a short sale won't do.

The next opportunity to sell is after the trustee files a notice of abandonment (or after discharge) and then it would be up to the lender(s)

Have your uncle contact the lender(s) in anticipation of the discharge, I imagine they would be interested if he had a potential buyer, a short sale might be more profitable than a foreclosure.

There is no law about the credit reporting agencies having a post-discharge foreclosure on the report but courts have pretty consistently ruled that reporting adverse info on accts included in the Bk is a violation of the discharge injunction. The FTC has issued a couple position letters saying the same thing. Write enough letters, it shouldn't be too hard to get it off.

..at any rate, you are out of the loop. You discharge should be a nice post-Christmas gift, congratulations!

Tom in Colo

[tobee43]

tom cleared that up extremely well....these 1099c questions have be roaming for a bit....you lost your home and the bank may attempt to say you make money off the lose but it will not fly....and could be fought with no problem...or i shouldn't say none...but you should be fine.

[IBroke]

There is no law about the credit reporting agencies having a post-discharge foreclosure on the report but courts have pretty consistently ruled that reporting adverse info on accts included in the Bk is a violation of the discharge injunction. The FTC has issued a couple position letters saying the same thing.

I just wanted to chime in on that: The ACCOUNT of said mortgage is not allowed to show adverse info after they were IIB. No doubt about that. However, I do think that the foreclosure COULD be reported as a PUBLIC RECORD and have a negative affect on your report which could be avoided through a short sale after discharge.

[tcreegan]

Hi all, Hi IBroke,

They can report a short-sale too, it takes a good sized chunk out of your score too.

BUT...what credit reporting agencies can do is not always what they will do....and with enough letters, you can often get them to do what you want them to do.