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Bankruptcy Law/Los Angeles Bankruptcy Attorney Dislikes Short Sales

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Question
I received my Chap 7 discharge this year and included my property in the Chap 7.   Now I need to move out and find a smaller place to live in. Assuming the lender allows me to do a short sale, am I required to provide the buyer with a Real Estate  Property Disclosure Statement?  

If I  recall correctly,  if the property was in bankruptcy,  I am not required to provide the  property disclosure statement.

Answer
Leon Bayer
Leon Bayer  

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As a Los Angeles Bankruptcy Attorney, I get short sale questions frequently from my own clients. Even though you had a bankruptcy discharge, you are still required to provide the buyer with a Real Estate Property Disclosure Statement.

Here's why. A short sale is still an ordinary voluntary sale. You yourself are the seller. It is not a foreclosure sale. It is not a sale of assets by the bankruptcy trustee. It is a normal, ordinary sale between you and a buyer.

The public policy behind the requirement for a Real Estate Property Disclosure Statement is to protect the buyer. It has nothing to do with the status between you and the lender. Your bankruptcy discharged your personal liability to the lender. However your bankruptcy discharge does not protect you from potential future liability to a buyer. The buyer in some future sales transaction was not a party to your bankruptcy case.

However, I do understand why you asked the question. You must have read somewhere that a bankruptcy trustee does not provide a Real Estate Property Disclosure Statement. That is because a sale by the bankruptcy trustee is not a voluntary sale. Likewise, no such statement is required for conducting a foreclosure sale.

In this matter, you are a private seller. You are not a bankruptcy trustee. After your bankruptcy case was closed, the property reverted back to you because it was legally abandoned by the bankruptcy estate.

I generally advise my own clients not to do a short sale after they have filed bankruptcy. (There are occasional exceptions and each case must be looked at separately.)

A typical short sale gives the seller nothing in terms of money. However, you still have the potential liability to the buyer for undisclosed defects. Your real estate agent gets a payday when escrow closes. What are you going to get?

If my clients don't get a payday when escrow closes, I don't want to see them on the hook for potential liability to the buyer. Why accept liability when you are not being compensated for the risk? Obviously there is no single right or wrong answer about whether or not to do a short sale. Each situation should be examined separately on it's own merits. What I'm saying is that generally, I do not like short sales.

Disclosure, or non disclosure is a very big deal. Big enough that a law was passed requiring a Real Estate Property Disclosure Statement in California.

People who do a short sale are usually people who have had financial problems. People with financial problems usually don't maintain their property very well because they don't have the money to do it. Property that has been neglected is prone to have problems. Sometimes the problems are obvious and easy to disclose, sometimes not. Perhaps there are hidden defects that date from before you yourself bought the property that were never disclosed to you?

Buyers frequently make renovations and remodel. That's when undisclosed defects often come to light, as when a wall or a ceiling or floor gets opened up. Serious defects get exposed to the light of day. If a problem existed but was not disclosed, (even though you know that you didn't know about it), the buyer might still claim you must have known about it and you fraudulently failed to disclose it. If it is an expensive problem, the buyer might rather have you to blame than have to pay for it themselves. If unresolved, then it may become an expensive court fight. Why do you want the possible liability of waking up one day to such a headache?


(Leon Bayer is a Los Angeles bankruptcy lawyer with 33 years of expertise in handling bankruptcy cases. His bankruptcy law firm in Los Angeles, California, is Bayer, Wishman and Leotta also publishes Link text so that clients and friends of our firm get quick access to our decades of bankruptcy experience. Also see us at: Link text and Link text. You can also watch our videos on YouTube at http://www.youtube.com/channel/UCD5euh54vh66iOzk9rmO5rg?feature=results_main)  

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Los Angeles Bankruptcy Lawyer Leon D. Bayer

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Leon Bayer is a bankruptcy attorney in Los Angeles, California. Leon has successfully represented clients in Los Angeles bankruptcy cases for over 30 years. He is frequently called upon by the media, the California Bar and other associations to provide insight and help educate attorneys on bankruptcy issues. Leon Bayer es un abogado de bancarrota en Los Angeles, California. León ha representado exitosamente a clientes en casos de bancarrota de Los Ángeles por más de 30 años. Él es llamado con frecuencia en los medios de comunicación, la barra de California y otras asociaciones para proporcionar información y ayudar a educar a los abogados en materia de quiebra. Leon's Los Angeles bankruptcy law firm is Bayer, Wishman & Leotta, founded in 1989 and has successfully represented individuals and commercial clients in bankruptcy proceedings for over 22 years. Leon Bayer and his partner, Jeff Wishman, are Certified Bankruptcy Specialists who bring experience, skill and creativity to the highly complex area of bankruptcy law. And not just a little experience. Between the two partners, they have over 60 years of experience as bankruptcy attorneys representing consumer debtors in Los Angeles, Long Beach, Woodland Hills, North Hollywood and the entire Los Angeles basin. As a long-standing expert, Leon is frequently called upon by the media, the California Bar and other associations to give opinions, provide insight and help educate new attorneys on bankruptcy and its changing laws. This blog is one more way that Leon Bayer and Jeff Wishman share their experience with the public and provide resources for individuals struggling with debt problems. You can learn more about Los Angeles Bankruptcy Attorney Leon D. Bayer at Hyperlink Code

Experience

Leon is a Certified Specialist in Bankruptcy Law by the State Bar of California, and has been a practicing bankruptcy lawyer in Los Angeles, California for 33 years. To learn more about Los Angeles Bankruptcy Attorney Leon D. Bayer, go to http://en.wikipedia.org/wiki/Leon_D._Bayer Leon Bayer es un abogado de bancarrota en Los Angeles, California. León ha representado exitosamente a clientes en casos de bancarrota de Los Ángeles por más de 30 años. Él es llamado con frecuencia en los medios de comunicación, la barra de California y otras asociaciones para proporcionar información y ayudar a educar a los abogados en materia de quiebra. Los Angeles bufete de abogados de bancarrota de León es Bayer, Wishman y Leotta, fundada en 1989 y ha representado con éxito a clientes individuales y comerciales en proceso de quiebra desde hace más de 22 años. Leon Bayer y su socio, Jeff Wishman, son Especialistas de Concursos certificados que aportan experiencia, la habilidad y la creatividad a la zona de alta complejidad de la ley de bancarrota. Between the two partners, they have over 60 years of experience as bankruptcy attorneys representing consumer debtors in Los Angeles, Long Beach, Woodland Hills, North Hollywood and the entire Los Angeles basin. Entre los dos socios, que tienen más de 60 años de experiencia como abogados de bancarrota de los deudores que representan a los consumidores en Los Angeles, Long Beach, Woodland Hills, North Hollywood y toda la cuenca de Los Angeles. Como experto de larga data, Leon se llama con frecuencia a los medios de comunicación, la barra de California y otras asociaciones para dar opiniones, proporcionar información y ayudar a educar a los nuevos abogados de la bancarrota y las leyes cambian. Este blog es una manera más que Leon Bayer y Jeff Wishman compartir sus experiencias con el público y proporcionar recursos para las personas que luchan con problemas de deuda.

Organizations
National Association of Consumer Bankruptcy Lawyers, California Bar Association, Los Angeles County Bar Association. Presidente, 1995-1996-Los Angeles Forum bancarrota; Miembro - Comité de la Asociación de Abogados del Condado de Los Angeles en la Ley de Bancarrota Comercial, 1988. Law Advisory
Opinión de la Comisión-Personal & Small Derecho Concursal del Colegio de Abogados del Estado de California, 1996-2000

MR. BAYER DICE: Los grandes bancos y de los companys de tarjetas de crédito han estado trabajando horas extras durante muchos años para vulnerar el derecho constitucional que del pueblo estadounidense para que pueda reclamar la protección de bancarrota. En 2005, el lobby bancario logró convencer al Congreso y al Presidente que hacen las leyes y proceedures más complicado, hopeing que va a obstaculizar las personas que sí que la declaración de quiebra. Tuvieron éxito en la obtención de estos nuevos y complejos proceedures legales por engrasar el sistema legislativo con cientos de millones de dólares en contribuciones de campaña "." La buena noticia para el pueblo estadounidense es que mientras que las nuevas leyes han hecho los proceedures innecesariamente complejas hasta el punto donde la gente sin experiencia no puede dejar de tropezar con el laberinto de las nuevas normas y reglamentos, el proceso es aún factible, especialmente con un abogado que está bien entrenado y con experiencia en esta especialidad.

Publications
Author, ?The Essentials Of Chapter 13,? Daily Journal Report, December 18, 1987.
Contributing Editor, Basic Bankruptcy, California Practice Handbook, Matthew Bender 1992, 1993.
CEB Consultant, CEB-Personal and Small Business Bankruptcy Practice in California, 2003.
A free on line bankruptcy books for consumers at www.bestbankruptcybook.com

Education/Credentials
B.A., J.D.

Awards and Honors
President, 1995-1996-Los Angeles Bankruptcy Forum; Member - Los Angeles County Bar Association Committee on Commercial Law & Bankruptcy, 1988. Law Advisory
Commission-Personal & Small Business Bankruptcy Law of the State Bar of California, 1996-2000

MR. BAYER SAYS: The big banks and credit card companys have been working overtime for many years to undermine the Consitutional right of the American people to be able to claim bankruptcy protection. In 2005 the banking lobby successfully convinced Congress and the President to make the laws and proceedures more complicated, hopeing that it will stymie legitimate people from filing bankruptcy. They succeeded in gaining these complex new legal proceedures by greasing the legislative system with hundreds of millions of dollars in "campaign contributions." The good news for the American people is that while the new laws have made the proceedures needlessly complex to the point where inexperienced people can't help but trip over the maze of new rules and regulations, the process is still doable, especially with a lawyer who is well trained and experienced in this specialty.

Past/Present Clients
I have probably handled something on the order of about 15,000 bankruptcy cases throughout my career. Probablemente he manejado algo del orden de alrededor de 15.000 casos de quiebra en toda mi carrera.

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