If you are a homeowner struggling to make your mortgage payments, a short sale of your home may unload some of your debt. If you have other significant debt, however, filing for bankruptcy may be a viable option for you. The bankruptcy lawyers at Anidjar & Levine have advised many Fort Lauderdale clients on how a short sale may affect their financial situation. Contact us today to learn more.Short Sales
A short sale occurs when a home is sold for less than what the homeowner owes on the mortgage. This differs from a foreclosure sale because a foreclosure occurs after you have already fallen behind on your mortgage payments. Since the mortgage is secured by your home, the lender will exercise its right to sell your property to recover the balance of the loan.
In a short sale, your mortgage lender and any other lien holders consent to a sale of the property for less than what it is owed. You must provide proof of your financial hardship or inability to make your mortgage payments. Then, you must demonstrate that the value of the property is less than the amount you owe, find a qualified buyer, and receive final approval from all your mortgage lenders to proceed with a short sale of your home.
The difference between the amount you owe and the amount for which the property is sold is known as the deficiency. For a short sale to be effective, the lender should forgive the deficiency amount. In Florida, a lender has the option to forgive the deficiency, but it also can pursue a judgment against you and collect on the amount you owe.Deficiencies in Florida Short Sales
Several states prevent mortgage lenders from collecting on the deficiency amount in a short sale. Unless the lien holder specifically waives its right to pursue a deficiency judgment, however, Florida law gives a lien holder up to one year to ask the court for it.
For example, suppose your home is valued at $200,000, but the amount owed on the mortgage is $300,000. The home’s market value is less than the mortgage amount. If your mortgage lender agrees to a short sale, and your home sells at the market rate, you will be short $100,000. The mortgage lender may consent to waive the $100,000 deficiency, in which case you have no further obligation to pay the debt. You will, however, incur tax liability for the forgiven deficiency amount.
If the mortgage lender does not waive the deficiency, it has the right to seek a judgment against you for the deficiency. If it obtains a judgment, the lender may garnish wages as a way to get payment.How Bankruptcy May Help
If your lender refuses to waive the deficiency, you may consider filing for bankruptcy. If you are eligible for Chapter 7 bankruptcy, you can surrender your home to a trustee. The trustee and the mortgage lender will then try to sell the home as part of the liquidation process.
If you wish to keep your home, you can avoid a short sale by reorganizing your debt under Chapter 13. You can apply for a loan modification and obtain a monthly mortgage payment you can afford. If you have other substantial debt, filing for Chapter 13 will allow you to make payments to your creditors based on your disposable income.
A short sale is an option if you face financial hardship and cannot make your mortgage payments. However, if you have significant debt, or if your lender refuses to waive the deficiency, you may want to consider bankruptcy.Offering Seasoned Bankruptcy Representation in Hollywood
Seeking the help of an experienced bankruptcy attorney will help you decide if a short sale or bankruptcy is appropriate for your particular situation. Anidjar & Levine provides dedicated representation in bankruptcy and related matters. If you are unable to make your mortgage payments, our Hollywood bankruptcy attorneys can advise you on whether a short sale or bankruptcy is appropriate in your case. We serve residents of West Palm Beach and Miami-Dade County, among other South Florida locations. Call us today at (800) 747-FREE or fill out our online form to arrange a confidential consultation at no cost.