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Bankruptcy Law/Short Sale after a Chapter 7 Discharge


In California. I 'm applying for a short-sale of my residence , because my loan modification was denied.  The residence and other debts were  discharged in Chapter 7 three years ago.

I will be providing the buyer with a "Transfer Disclosure Statement" and I will state all known defects. However I will have no knowledge of unknown defects.  My broker says that some buyers sometimes do their own inspections or don't them at all.

To be protect myself, I plan to condition the sale to the buyer by having him sign a statement declaring that he won't hold me liable for any monetary damages should unknown defects surface after the closing and recording of the short-sale.

If he promises not to sue me to collect for any future economic damages, does the law still protect him if he wants to go after me  anyway, and if so, does he have the potential to collect money for damages?

All you need to do is disclose defects that are either obvious or something you would know that your buyer might not know -- such as whether cats lived in the house at one time -- anybody can sue anyone else especially in California where lawsuits are the second most popular lottery and you can't contract away someone's right to sue for alleged fraud. I always recommend a home inspection for this same reason -- if you're not aware of a defect and the inspector doesn't find it, it's pretty difficult to hold the owner liable.  

Expect the lender to take a long time to make a decision on your short sale by the way;  that's typical.

Worst case:  you can let them foreclose and the total burden of the house sale falls on the lender in that case. If you decide to do that, find out if your lender participates in "cash for keys" which is a program where they pay the owner they've just foreclosed on up to $3,000 to leave the place clean and in good condition;  they never volunteer this -- it is something you have to ask for and it only works after a foreclosure.

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Consumer bankruptcy questions invited. I've been filing Chapter 7, 11 and 13 cases since 1985 in Calif and Arizona. I do NOT do homework questions. Let me know what state you're located in when you write. My bankruptcy practice is limited to California and Arizona but inquiries from other states are welcome. Your local jurisdiction determines exemptions. Find more background information at our website, Individual Chapter 11 and small business chapter 11 questions invited. We can also advise on the creditor's side if for example you have a fraud case, money judgment etc against someone who has filed (or is threatening) bankruptcy. We have filed and defended numerous adversary complaints in bankruptcy court and opposed trustees' demands for turnover of assets from time to time.


My partners and I have filed over 5000 consumer and small business cases to date in California and Arizona.

I've been a member of the California bar since 1984 and Arizona since 2004; also a member of the National Association of Consumer Bankruptcy Attorneys, Bankruptcy section of the Arizona State Bar, Tucson Association of Consumer Bankruptcy Attorneys, Arizona Consumer Bankruptcy Counsel and American Hellenic Educational and Progressive Association (AHEPA).

I've written a booklet on land trusts for real estate owners, players and dealers, and co-authored a special edition of "Stop Sitting on Your Assets". I was a writer of a monthly law review article relating to California real estate issues and pending and recently enacted legislation.

Attorney at law, experienced in trial procedures, adversary complaints filed and defended and numerous claims objection proceedings as well as filing cases for consumer and small business debtors.

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