Short Sale In Chap 7...
I am working on a short sale where the subject property is currently in bankruptcy (Chap 7).
The lender has received a signed offer between myself and the mortgage holder.
The loss mitigation rep informed me today she now needs a statement of release of the property from the bankruptcy Trustee before they will consider the offer.
My question is:
What happens to the property if the bank does not agree to sell it for the asking price, after it has been released from bankruptcy protection?
(Is the release contingent on the sale being executed?)
In other words:
Does the property revert back to the bankruptcy by default if the sale never closes?
Thanks in advance!
[ Edited by Monty on Date 07/03/2003 ]
If the Chapter 7 trustee signs a “notice of abandonment,” the house reverts back to the debtor. A notice of abandonment would be appropriate when there is no reachable equity in the estate property ie. the collateral is fully encumbered by a valid perfected security interest.
If your short sale fails, then the debtor keeps the home until, 1. the Discharge Order is entered, 2. in the alternative, the creditor files a motion to terminate the stay, based on debtor's failure to pay, lack of equity, and because "it is not necessary for an effective re-organization of the debtor." The house does not automatically revert back into the bankruptcy estate, however, the mortgage company is still barred by the automatic stay from collecting from the debtor while the case is still pending.
assuming that the debtor's stated intention in the BK is to "surrender" the home, if the banks do not accept your offer to purchase, then they will likely seek to lift the stay to proceed with foreclosure.
[ Edited by Utah_Bkatty on Date 07/04/2003 ]
Shortsale what do you think about this response?