Expert: Mark J. Markus- California Bankruptcy Attorney - 9/16/2009

Question
Hello,

I live in California and I am in the process of a short sale.  I have received approval from both the first and second lien holders after about 8 months of going through their processing.  I have had an offer in with the lender all of that time and now things are progressing and we are getting down to the wire for the close of escrow.  However, the second will have a remaining amount of about $48K not satisfied by the sale. They (2nd lien holder) made me agree to owing the balance and to continue making payments on the loan or else they would not approve the short sale.  The problem is that my income has dropped so much that I can not make the payments on the second, my credit cards and still have any living expensed left over. To add another twist, my mother and I own an income property in Kern County, which is also upside down.  My question is, if my assets are less than my debts and I file for bankruptcy, will being insolvent so to speak clear some or all of the remainder on the second?  Also, which chapter of bankruptcy would best suit this situation?  

Thank you for you help,
MC in California

Answer
Yes, bankruptcy will get rid of any deficiency you owe to the 2nd, but it will not get rid of the lien unless you file a Chapter 13 case and are successful with a Motion (or Trial) to remove the lien (which can be done if the amount owed to the 1st mortgage is less than the value of the property).

http://www.bklaw.com/