Does the bank have the right to expose her to a deficiency judgment if they cooperate in the short sale? 7 Answers as of April 07, 2011

My client went through a bankruptcy and elected to abandon her home since there was negative equity. The bankruptcy was discharged. The bank began foreclosure. She moved out of the property. I spoke to her about a short sale. Does the bank have the right to expose her to a deficiency judgment if they cooperate in the short sale?

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Mercado & Hartung, PLLC
Mercado & Hartung, PLLC | Christopher J. Mercado
It depends on your state. If she is in WA, my firm offers foreclosure defense litigation and alternatives services. I can speak with her regarding her options, we give free consultations.
Answer Applies to: Washington
Replied: 4/7/2011
Law Offices of Michael T. Krueger
Law Offices of Michael T. Krueger | Michael Krueger
I am confused how her home could have been discharged through bankruptcy yet you still are trying to do a short sale. When real property is surrendered during bankruptcy the bankruptcy court considers the debt discharged because the collateral was given back to the secured note holder. The bank will issue her a 1099, but form 938 should have been given to her by her bankruptcy attorney, which is the exemption due to bankruptcy. She cannot work with the bank to conduct a shortsale.
Answer Applies to: California
Replied: 4/7/2011
Janet A. Lawson Bankruptcy Attorney
Janet A. Lawson Bankruptcy Attorney | Janet Lawson
Yes, they can come after your client even if they cooperated with the short sale. You need to check your state law to see if the loan was a recourse loan. In California for example, purchase money loans, (even if they are seconds) on residences are non-recourse loans.
Answer Applies to: California
Replied: 4/5/2011
Gus Johnson Attorney at Law
Gus Johnson Attorney at Law | Gus Johnson
Your client should consult with the attorney who did her bankruptcy.
Answer Applies to: South Dakota
Replied: 4/4/2011
Ferguson & Ferguson
Ferguson & Ferguson | Randy W. Ferguson
If she completed the bankruptcy they cannot come after her. If the mortgage was not discharged, they can still come after her. She should talk to her bankruptcy lawyer. They would be the best one to make any legal decisions.
Answer Applies to: Alabama
Replied: 4/4/2011
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