Behind of mortgage - short sale?

[2bdebtfree]

This is not for me but for my neice.

She has a house and is behind on the modification the bank gave her. She is the only one working and not a whole lot of money. She also has credit card debt and owes back federal taxes.

She has been thinking about a short sale. She is underwater with her house.

Could she file Chapter 7 for her credit cards and just give the house to the Trustee? I'm not sure how that works. She already has a place in line to rent. She is married with 3 kids.

Would it be better for her to short sale the house? She does have a car payment. I need to talk with her more.

I figure if she does it all in Chapter 7, it would be better for her on her credit report than a foreclosure and still having late credit card payments, etc.

I know not alot of information but maybe if someone could refer me to a thread that is along the similar lines.

Thanks so much!!

I just saw the sticky.

[bkw1nter]

You should have her talk to a lawyer, most give free consultations.... I do know if she has any thoughts of filing a chapter 7 she should do it before she does a short sale reason being that if she has to pass a means test(basically a test to prove that she is unable to pay all of her bills and her debt) they only allow you to include so much rent in the test i.e. say she is renting for $1500 but they may say she should only be renting for $1000, so they only include $1000 but if you are paying a mortgage they will include the whole amount in the test. I had some friends that got foreclosed on and then filed bankruptcy and they had to file a chapter 13 because of this exact reason. Also filing chapter 7 really throws a wrench into the whole foreclosure process.... My Chapter 7 was discharged Oct. 08, I haven't made a mortgage payment since Aug. 08 they still haven't foreclosed and I am trying to Short Sale now because our neighbors are our friends...

[2bdebtfree]

Thank you for the info. I'm going to get in touch with her tomorrow and have her consult a bk attorney. Thanks again.

[rosetaylor01]

In recent years the popularity of short selling is due to increases in loan losses. Short selling is a process where you sell the house for less money than I owe on it. Although there is still no general way to avoid foreclosure, short sales can work if the mortgage company is ready and the buyer agrees.