Bankruptcy and Short Sales in Massachusetts and New Hampshire. How does bankruptcy affect your short sale?

Bankruptcy Vs Short Sale in Massachusetts

Jessica Greenwood Bankruptcy Attorney

We have done enough short sales to see our fair share of bankruptcies occur. There
is an impact to a homeowner’s credit and their short sale if they file bankruptcy.
Homeowner’s in need of filing need to speak to an experienced attorney if
they are considering bankruptcy as an option to stall a foreclosure or capture
their deficiency from a short sale. I would even suggest they find a bankruptcy
attorney that also specializes in Real Estate.

Short Sale Mitigation, LLC works with several experienced attorneys. When we
meet with homeowners facing foreclosure or with mounting debt, we always refer
our clients to attorney’s who we have worked with in the past or that we
know see the value of a short sale as opposed to foreclosure.

I was granted the distinct opportunity to interview one of the attorneys we
work with and refer homeowners to. Attorney Jessica Greenwood, from the Law
Office of Todd Beauregard, spoke with me about the impact of bankruptcy on a
homeowner’s short sale. My interview is now live
on our site for any homeowner who wants more information about a Massachusetts
or New Hampshire bankruptcy.

Let’s go over the highlights of the interview:

Short Sale Mitigation Massachusetts – Which homeowners should be filing bankruptcy?
Attorney Jessica Greenwood – There are three types of homeowners that
should file a bankruptcy:
1.The homeowner who can afford their mortgage, and are current on it but simply
have a lot of credit card debt.
2.The homeowner, who can afford their mortgage, however fell behind due to
an unforeseen circumstance but has since recovered. Filing a Chapter 13 Plan
can help to cure an arrearage and help a homeowner stay in their home.
3.The homeowner who cannot afford to keep their home, they can file a Bankruptcy
and surrender the home and be alleviated from the debt from the house.

Short Sale Mitigation – Can you explain the difference between Chapter 7
and Chapter 13 for us?
Attorney Jessica Greenwood – In both cases it is necessary to determine
income and asset protection levels,
this will help you structure your case and determine chapter.
•Chapter 7: In order to file you must be below a median income that is defined
state by state. Once you determine you are below a median income, you are
able to list your assets, keep those which you are current on the payments
and surrender those assets in which you decide you no longer wish to keep.
•Chapter 13: A Chapter 13 case is a repayment plan of all or a part of the
debt you owe. Unlike a 7, this requires some form of a payment plan. In this
type of case, you can keep assets even if you are not current on the payment
and provide for payment in the plan.

Short Sale Mitigation – When would you tell a homeowner NOT to file bankruptcy?
Attorney Jessica Greenwood
•If a homeowner is in the middle of obtaining a loan modification, it is
absolutely best NO to file until that is complete unless there is an emergency
that would dictate otherwise.
• If a homeowner has too much equity in their home or assets that the Bankruptcy
Code does not provide protection for, it would not be advisable to file.
•At times a homeowner has no other debt except for the home, and then I would
not advise filing the Bankruptcy just to get rid of the home. I would suggest
a short sale or a deed in lieu of foreclosure before the bankruptcy. Not all
lenders are issuing deficiencies these days and it may be putting the cart
before the horse by filing a Bankruptcy.
•If the homeowner is attempting a short sale, and a foreclosure is impending
then a Bankruptcy can stop the foreclosure and allow for more time for the
short sale to go through
Chapter 7 Bankruptcy – once filed the bankruptcy cannot be voluntarily
dismissed by the debtor.
—- i. By filing a complete petition before the foreclosure, requires the
lender to abide by the Automatic Stay and postpone the foreclosure sale
• Chapter 13 Bankruptcy – once filed the bankruptcy can be voluntarily
dismissed by the debtor
—-i. Some Attorney’s will file a Chapter 13 to obtain the “automatic
stay” for the debtor and allow the case to dismiss without a discharge
— ii. This is not advisable. (1) This is abuse of process of the system
and the attorney and the debtor can suffer the consequences and (2) the debtor’s
credit already has the ‘bankruptcy’ mark.

If a debtor’s income is too high for a Chapter 7, and needs the bankruptcy
protection to stop or delay a foreclosure, then a Chapter 13 Plan can be formulated
to pay off any other unsecured debt while surrendering the home and allowing
the short sale to move forward

Short Sale Mitigation – When should a homeowner in Massachusetts or New Hampshire
file bankruptcy in conjunction with a short sale?
Attorney Jessica Greenwood – Unless the bankruptcy is needed to post
pone a foreclosure, it is best to file the bankruptcy after the short sale

Short Sale Mitigation – How and Why does a bankruptcy affect a foreclosure
Attorney Jessica Greenwood – Once a debtor files for Bankruptcy, whether
7 or 13, the debtor has the protection of the “Automatic Stay”. This
provides a ‘shield’ against the creditors. The creditors cannot foreclose,
repossess or collect on any debt until the Automatic stay is lifted or the case
is closed. Because of this Stay, the bank cannot foreclose on a home while under
the automatic stay and thus the sale is postponed until the lender foreclosing
gets relief from stay or the case closes.

Short Sale Mitigation – How fast can someone file bankruptcy if eligible
and facing foreclosure?
Attorney Jessica Greenwood – Bankruptcy filing is electronic and can
be done in a very short time period, however, in order to file a list of documentation
is needed and to draft a full petition does take some time. If an extreme emergency,
an attorney can file a ‘shell’ petition; however there is a very limited
time frame to supplement the filing.

In order to be prepared for all scenarios, a homeowner should closely watch
the impending foreclosure date, and if it appears that a bankruptcy is imminent
to stop the foreclosure OR imminent due to a large deficiency or credit card
balance, the homeowner should consult with an attorney two weeks prior to the
foreclosure date. This time frame will lessen the stress of the homeowner and
the attorney attempting to help the homeowner.

Short Sale Mitigation – How does a bankruptcy affect a person’s credit?
Attorney Jessica Greenwood – Bankruptcy is a notation on your credit
report for 8 – 10 years. Most creditors are giving new credit almost immediately
after a bankruptcy, however car loans and home loans you will likely need to
wait at least a year or two before obtaining good rates. The best way for a
debtor to recover from bankruptcy on their credit is to get a secured credit
card immediately after the case discharges, making sure the secured credit card
reports to the credit bureau, and if the debtor has secured debt they are keeping,
keep the payments on time.

Short Sale Mitigation – Credit wise what’s worse; Bankruptcy and a short
sale or bankruptcy and a foreclosure?
Attorney Jessica Greenwood – Again, Bankruptcy is a notation on your
credit report for 8 – 10 years. If you wish to be a homeowner again in
the near future, it is better to short sale than to foreclose. Although foreclosure
is sometime inevitable, if you can short sale first, it looks better on your
credit in the long run (especially to mortgage companies).

Short Sale Mitigation – What process does a homeowner follow if they are
in the midst of a short sale and want to file bankruptcy?
Attorney Jessica Greenwood – If you file a bankruptcy in the midst of
a short sale, you need to work with your attorney to ask the Trustee to “abandon
the asset” from the bankruptcy estate. When you file a bankruptcy, all
your assets become assets of the bankruptcy estate. Let the Trustee know you
are working on a short sale with your lender and more than likely the Trustee
will ‘abandon’ the asset and allow the sale. The rest of the bankruptcy
will proceed.

Short Sale Mitigation – Can a homeowner file bankruptcy YEARS after completing
a short sale if the lender has “reserved the right to pursue the deficiency?
Attorney Jessica Greenwood – Yes. There is not a statute of limitations
on how old the debt will have to be to discharge it.

Short Sale Mitigation – It seems like some attorneys could care less about
short sales if the homeowner files bankruptcy. Why do you think that is?
Attorney Jessica Greenwood – I can’t speak for all attorneys, just
what I have seen …Going through a short sale can be stressful to a homeowner
who is probably dealing with other stressors. The attorney may feel it is easier
for a homeowner to just file a bankruptcy and let the lender foreclose. I tell
my clients that if they work with the right short sale negotiator and realtors
then it should feel just as seamless as allowing the bank to take it back.

Short Sale Mitigation – What is the difference between deficiency and deficiency
judgment in short sales in NH and MA?
Attorney Jessica Greenwood – Both states: When you sign a promissory
note, you promise to pay back the entire balance, plus cost to the lender. Thus
when a foreclosure occurs, or at times a short sale, the lender loses money
and has the right to pursue collection efforts.

New Hampshire: The last law on the books for NH collection of a debt due to
a mortgage loss is 20 years. Now, it is highly unlikely that a lender collects
20 years later, there are defenses to this such as ‘Laches’, an undue
delay on behalf of the creditor. Most often it is within 1-5 years.

Massachusetts: The claim on a mortgage note followed by foreclosure is 2 years,
however if they sue on that debt within 2 years and obtain a judgment, then
its swiftly preserved for 20 years

Short Sale Mitigation – What is your thought on approvals with boilerplate
language that states the lender reserves the right to pursue the deficiency?
Attorney Jessica Greenwood – Boiler plate is what it is, boiler plate.
You probably are not going to get a lender to remove the preserving language.
The best way to protect homeowners is to read the fine print and try to get
language in the short sale approval letter that states “ABC Lender will
not, under any circumstance, pursue homeowner for loss sustained due to the
sale amount of XX”

Short Sale Mitigation – If a homeowner is considering a bankruptcy to stall
a foreclosure, or capture deficiency from a short sale, when would you tell
them to contact you?
Attorney Jessica Greenwood – The sooner the better! If you are entertaining
a bankruptcy, the homeowner should have a consultation with an attorney at the
beginning of the short sale process. This way, the homeowner is armed with all
the knowledge they need with regards to the short sale process, the bankruptcy
process, and how, if they have to be, are tied together.

We have  seen our fair share of homeowners file bankruptcy. What I’d like to add
to the above information is if a homeowner files bankruptcy before the short
sale is complete, the “stay” will add at least 30-60 days onto your
short sale, provided you are still allowed to proceed with the short sale and
only an experienced attorney will be able to tell you that.

Again, feel free to download the audio file of my interview with Jessica. There
was a lot more information in the audio file and I streamlined it for this blog.
If you are a homeowner considering bankruptcy, Jessica practices in Massachusetts
and New Hampshire and can easily assist you. Please contact her today at:

Contact Information:
Attorney Jessica Greenwood
Law Office of Todd Beauregard
25 Central Street, Lowell MA 01852


92 Main Street, Nashua NH

If you are considering a short sale, Nick and I are more than happy to work with
you. We utilize attorneys, accountants, Realtors, and work as a team to assist
you in the process. We keep all homeowner information confidential and treat
you with the utmost respect.

For more information on the short sale process you can log onto our website
– New Hampshire and Massachusetts short sales. for Realtors

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