310.376.9865
Los Angeles and Riverside Bankruptcy Attorneys have noticed a new development between the Bankruptcy Trustee and the Banks, whereby the banks agree to let the Bankruptcy Trustee sell the debtor’s (person who has filed bankruptcy) house in a “short sell.”
Scenario:
1. Debtor purchase a house at the top of the market for $400,000 today it is worth $250,000.
2. Debtor now has to file Chapter 7 bankruptcy.
3. Even though there is no equity in the house, it becomes property of the bankruptcy estate, and subject to control or sale by the Bankruptcy Trustee.
4. The Trustee enters into an agreement with the bank to sell the house at today’s market value of $250,000, and the rest of the debt owed to the bank is wiped out. From the $250,000 proceeds from the sale, the Trustee might get $15,000 to $20,000, from which he pays back a percentage to the unsecured creditors.
Bankruptcy attorneys are keeping a watchful eye on this new trend at this point. So far, it doesn’t appear the Bankruptcy Trustees are considering this if the house is their primary residence, if the debtor is in the loan modification process, if there is more than one loan on the property. However, there are some Bankruptcy Trustee’s that are questioning the debtor’s at the 341a hearing if they would consider a short sale.
So, at this point it appears that the Bankruptcy Trustees are pursuing their duties, and not putting the debtor out in the street.
- Law Offices MJ Mann Bankruptcy Attorney
- 2706 Artesia Blvd, Suite BK
- Redondo Beach, CA 90278
- 310.376.9865
