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Foreclosure/foreclosure/short sale after bankruptcy


QUESTION: Hi!  Thanks for volunteering to answer questions for those of us in need.  Here is my story... we filed chapter 7 bankruptcy almost 5 years ago for a variety of reasons.  The mortgage on our current home was included in this bankruptcy.  Every time we get a statement it says "for informational purposes only, this is not an attempt to collect a debt" or something like that - we are current on our mortgages, however.

Last year my husband got an opportunity to transfer out of state with work.  We listed our house for sale last February and it was on the market for 5 months with no offers.  Our realtor (who didn't know about the bankruptcy because we never told her - we didn't realize the implications it had on our mortgage obligations but mostly we're trying to get past it and wanted to do things the traditional way) wanted to lower the price further but because we're slightly underwater, we couldn't.  Now we're hoping to move this summer (and actually we really need to this time as we can't back out of the opportunity again).

Here are the numbers:
We still owe just over 230K on the house.  According to Zillow and to the price/sq foot of similar homes in our area that have sold recently, we could expect to get maybe 230 at sale, but probably more like 225.  Taking into account realtor fees, this would have us paying several thousand out of pocket to pay off the mortgage, if we got a contract.  We'd like to consider other options.

We were looking into a short sale versus deed in lieu of foreclosure.  We then came across information indicating that either of those would be a waste of our time since the debt is already erased.  Maybe a regular foreclosure is not the worst option?

My question is, considering impact on our credit report and any financial concerns, what might be our best avenue?  I have read about some states being able to come after you for the amount of deficiency if you do a short sale, or sometimes the money has to be considered as income in other situations which can hurt you in terms of taxes and I just have no idea what to do!  Any advice would be appreciated.  We live in PA, by the way.


ANSWER: Please answer this before I can answer your question. Why are you still paying on your mortgage if it was included in your chapter 7 bankruptcy?

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QUESTION: Answer to your question: Basically our BK attorney said to keep paying to avoid the bank taking the house back.  We have lived in the house for the past almost 5 years since we filed and wished to continue doing so, until recently.  Thanks!

ANSWER: The first thing I would do is contact the BK attorney and make sure you still own the home. It sounds to me like you are not sure. Based on his answer and if he says you will have to pay taxes on the short sale difference. Then I will know what path you might take. It sounds like a deed in lieu might work and be the least damaging to your credit. I am very interested in knowing what he says about you owning the home or not. If you are not the owner of the home you probably should stop making the payments and stay there as long as you can (which could be up to six months or longer) and save the payments in a savings account to cover the cost of moving and also to gain back some of your loss. The effect on your credit should not be affected by this strategy. Please keep me informed because this could be a case that could drag out for a long time. If so I would like to offer more advice based on what the BK attorney says about this. Remember that the attorney is an officer of the court and we should look at his advise accordingly. He also might still have some duty to work on your behalf. In any case I wish you luck and please feel free to contact me at any time.

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QUESTION: Hello!  Thanks again for your response.  I found out today we'll definitely be moving and I confirmed with our attorney that we DO still own the home - it's still in our name anyway, according to her, based upon the fact that no action was ever taken after the discharge.  Since we DO still owe the home, do you advise still paying the mortgage each month?  We are still current.  My husband has contacted the bank about the deed in lieu and we are looking into that.  They said we do not have to be current to apply for one but we are doing some more research.  Thanks for any advice!

How many months is it going to be before you know you are going to move? If the bank is going to foreclose anyway, I would stop making payments based on the time schedule of six months before the bank takes the home back. I assume you are planning to move anyway, so count backwards from the time you need to be in your new home and when you are going to stop making payments. I further assume you have made arrangements to acquire your new home, based on you still having bad credit. I further assume you would be better received on the deed in lieu if you were past due on your monthly payment to the bank. If you would like more personal attention you can reach me at


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James D. Clardy


I have spent the last twenty-five years saving homes from foreclosure in South Carolina. I have extensive experience negotiating with lenders. I have postponed foreclosures for up to four years before the lender finally gave in and let my client keep her home "This is my specialty". One should never give up, even if you think it’s impossible. I know the ropes and can slug it out with the best of them. I can answer questions about what “to do” and what “not to do” during the foreclosure process as well as the pre-foreclosure and post-foreclosure process.


Twenty-five years of stopping foreclosures in South Carolina, to include properties both listed by Realtors and those owned by banks. Foreclosure properties to include pre-foreclosure and post-foreclosure , and what to do next.

I was a Real Estate Broker in South Carolina for the past twenty-seven years.

I have written several articals on E-How

Some college

Past/Present Clients
Thousands over the last twenty seven years

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