Should I file for bankruptcy???

[SeanTaylor]

I have been pursuing a short sale for quite some time. It just keeps going back and forth and I'm not so sure it's in my best interest to go through with it because of having to worry about them coming after me for the difference down the road. I just want to put this all behind me and have a chance to breathe. Here are the circumstances:

I live in Florida and it is a single mortgage Bank Of America loan.

I was stupid and took on a loan for 250k almost 4 years ago and now it’s worth ~120k.

The loan was given to me based on overtime which eventually went away and then struggled with payments.

I lost my job almost a year ago and decided to go back to school and have been in the short sale process ever since.

I have sold just about all of my assets to pay for living expenses and school and have no other debt other than the mortgage. I keep hearing that BOA will not release me of the deficiency even if I go through with the short sale. So now I don’t what I should do. My brother did a short sale and was released of any deficiency and said it was the greatest thing he did but BOA doesn’t seem to want to play ball. I don’t care about credit score as I can honestly not see myself borrowing money from a bank again and don’t know whether a short-sale, foreclosure, deed in lieu, or filing bankruptcy is best for my situation.

My brother told me to just go with the short-sale and not worry about it (hard for me to do) and if they do come for me down the road then pay it if I have it or file for bankruptcy then. I'm just not sure what to do? I bought this house when I was 21 and life was good but it has turned into the worst decision I have ever made. Between the money that I have paid the bank over the years and all the bailout money they got I'd think they would be satisfied.

What are the chances of BOA being able to go after all these people down the road? And if I chose do file for bankruptcy then will I still be able to? Right now I have no income or assets but later on when they would come after me I expect to be in a different situation than I am now. I would really appreciate anyone's thoughts!

Sean

[ooCHAOSoo]

I believe Florida is not a non-recourse state, like Massachusetts, and if BOA is saying that they will accept the short sale but you will be responsible for the deficiency, they will come after you for it. That is exactly what happened to me. After you go through with the short sale, you can put the deficiency in the BK. I wish we didn't have to do this but we cannot afford our monthly bills now, let alone the deficiency too. After consulting with a lawyer, we decided that BK is the best option for us. I suggest you speak with an attorney about your case and see what is best for you. Good luck!

[AngelinaCatHub]

Sean: I suggest you NEVER use your name on any blog or forum.

Now to business: As you are unemployed, if I hear this right, can't sell the thing on short sale, and here in FL it is a buyers market, not a seller's. Do what you need to do. Go pro se if you have to. Learn here and get the C7 book from Nolo Press online for about $25. There is no better time than now to get a new start. I don't see how you can avoid the ramifications of foreclosure, except to bk. This is your private decision and I don't think anyone here can answer that for you. Each person is a different case and circumstance. 'Hub

[SeanTaylor]

Thanks for your input. I did not use my real name though just an alias that I always use online. So both of you are in favor of filing now rather than waiting to see what will happen? I wouldn't even think twice about it if I also had lot's of other debt. You guys are pretty positive that they will go after all of these people? I mean the figures of foreclosures and short-sales are reaching the 2 million a year mark.. I would think that there would be an uproar if they went after all these people ESPECIALLY when they received a bail-out and many of the homeowners worked with the banks and did them a favor my going through the short-sale process. Those are my thoughts but then again I don't know what I'm talking about.. which is why I'm here.

[ashleywatson]

Yes, you can filer for the bankruptcy bit this is not to do yourself task i think you should hire attorney for this.

[SeanTaylor]

Any other opinions?

[tcreegan]

Hi SeanTaylor,

You sound fairly "judgment proof" You could do the short sale or let it foreclose, and let BoA sue for a deficiency judgment they can't collect. Later when you are getting out of school, you file BK and include any other unexpected debts that cropped up in the meantime. Additionally, you can get really sharp on the legal details of what has to be done to get a judgement and hope BoA screws up on something so you can void the judgement. Sounds like a long-shot, but it does happen.

Well, there is my 2 cents on non-BK now alternatives. Of course you seem to be a slam-dunk Ch 7 so thats an easy path for you..

Tom in Colo

[nceguyfromne]

SeanTaylor, I did a short sale a few years ago after my divorce. I paid an attorney to help me negotiate with the lender and even he, who was being paid to do this, told me I should just let them foreclose and file BK. Being too proud and wanting to preserve my honor and mediocre credit (which also included about $35K in CC debt), I went forward with the short sale. When I finally got an offer, the lender told me they would approve on the condition that I signed a promissory note for about two-thirds of the deficiency, payable in monthly installments for nearly 10 years! So, against my attorney's advice again, I did. I can't even describe how awful it felt writing a check every month for absolutely nothing except the privilege of not being sued.

A little less than 2 years later I finally came to my senses, filed Chapter 7 and got rid of all the nonsense. Best decision I ever made.

The others are right. No one can say for sure what's right for you and your specific situation. All I can say is that, based on my experiences, I wouldn't recommend bothering with a short sale. You're basically doing the lender's work for them, for absolutely no incentive.

[tjsmiley]

I was going to do a short sale too. I even had it listed with a realtor with a sign in the yard. Some time later, I realized that a short sale really is worthless, in my case at least.

Two problems can arise by trying to save yourself from BK by doing a short sale...one, the bank can refuse to put it in writing not to pursue the deficiency amount from you. You aren't protected. Why not let it foreclose? Your credit would take a huge hit with a short sale anyway. Two, even if the bank DID agree not to pursue the rest of the loan from you (in writing of course), the IRS will treat that "forgiven" deficiency amount as income, and you would have to pay taxes on it. Either way, you will probably pay.

Sorry to say, the bank doesn't care if you do them a favor by going through the short sale nightmare. Money is their bottom line. They are not going to do you a favor by not coming after you.

[scorpion35]

Hi SeanTaylor,

Later when you are getting out of school, you file BK and include any other unexpected debts that cropped up in the meantime.


Tom in Colo

i call that fraud
he knows he's going to file bk ,so any credit card charges going forward are considered fraudulent

[chicagoannie]

i call that fraud
he knows he's going to file bk ,so any credit card charges going forward are considered fraudulent

I disagree. Tom is not advocating fraud. He is not suggesting the OP rack up debts. UNEXPECTED debts are just that....unexpected.

[tcreegan]

....my, that did sound bad the way I worded it....

...I was thinking medical emergency, car wreck, lawsuit, bar tab, ...well maybe not the bar tab...

[enuffznuff]

A lot of the general public seems to have this impression that the banks 'wouldn't really' go after people for the deficiencies, but they ARE. In every case they are legally able.

So, they make these legislative adjustments on paper that sound good, but don't do anything. For example, I live in OR. OR is non-recourse for residential property. Initially, it was only for 1st mortgages. But then, all the people who financed their 500K houses in the boom on an 80/20 were squealing because the 20% was recourse (and they WERE getting tagged for it). So they changed the rules so that loans are non recourse IF TAKEN OUT AT THE ORIGINAL PURCHASE.

So all the people who refied during the boom? Sorry. All the people who took out HELOC or 2nd during the boom? Sorry. A lot of people here are getting a rude shock because all the articles in the paper talk about how oregon is non-recourse, but if you took out a heloc or 2nd after the original purchase date, you are SCREWED.

I know they have the legal right to do it, what boggles my mind is how the banks are able to control the media to the degree that people really don't believe this is going to happen to them until they start getting billing statements.

[tcreegan]

enuffznuff...you make the perfect case for the value of a good local attorney!

Tom in Colo

[scorpion35]

....my, that did sound bad the way I worded it....

...I was thinking medical emergency, car wreck, lawsuit, bar tab, ...well maybe not the bar tab...

thats what i thought