Does A Bankruptcy Ruin A Short Sale?

Bankruptcy and a Short Sale:

Every so often I run into a short sale where the seller recently filed bankruptcy.  In some instances, the lender is unwilling to consider a short sale after a bankruptcy is filed and/or a discharge is obtained.

Although I am not 100% sure, I believe the reason for this is because negotiating a short sale is considered a collection activity on a debt, which is forbidden during bankruptcy.

This definitely brings up an interesting point that if the above statement is true, why do some lenders still consider short sales and others do not.  To be honest, I'm not exactly sure.  I've had recent experiences where an owner has a first and second mortgage with the same lender and the first mortgage would approve the sale and the second would not because of the bankruptcy.  You would think that the internal policies would be the same within the same company even though they have different departments.

In any event, the bankruptcy may ruin the chances of a short sale, but it may not.  Until we make an effort to contact the lender and ask for a consideration of short sale, we won't know what they are willing....or unwilling to do.

Please contact us if you would like to pursue a short sale on your home, before, during or after your bankruptcy process.

Lastly, please keep in mind that you should consult with your attorney regarding the effects of a short sale before, during or after your bankruptcy.