I filed Chapter 7 bankruptcy in September 2009 and it was discharged in January 2010 . This BK included my primary residence. This property has still not been foreclosed to date and is vacent at the present time. My husband and I are waiting the two years to apply for a new home loan using a VA mortgage. We now realise that we are still on the title to the house included in BK. My question is can the bank report the foreclosure on credit reports since it was already reported as discharged in BK. And would it be better to try and get a deed in lieu or short sale the house to speed up the process of removing my name from the title. The bank is pressuring me to short sale. I am just very cautious with my next move because I want to be 100% sure of what can be reported on our credit reports.
Real Estate Attorney
Many people fail to realize that they continue to own a home after filing a petition for Chapter 7 bankruptcy and receiving a discharge. If the Trustee abandons the property - which they will likely do if the property is underwater, you continue to be the owner of the property which continues to have a mortgage lien. However, you no longer are personally obligated on the promissory note as a result of the discharge. If your home is in a Subdivision with a Homeowner's Association, you will continue to be responsible for association dues beginning from the date you filed the petition for Chapter 7 bankruptcy. Additionally, as the property owner, you continue to be responsible for any injuries suffered by anyone on the property.
If you now agree to work with the Bank to short sale your property, you may be eligible to receive a short sale incentive, will terminate your continuing financial responsibilities related to the property and can bring closure to the situation once and for all . I strongly suggest that you consult with a real estate attorney and realtor who are experienced in negotiating short sales. Good luck.
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Chapter 7 Bankruptcy Attorney
Although the bank will not report the foreclosure on your credit report, if the foreclosure takes place by a judicial process, the credit bureau will report the foreclosure because it is a PUBLIC RECORD.
Yes, this report is likely to further damage your credit but it isn't a violation of the bankruptcy laws.
Hope this perspective helps!
I am sorry to bring a negative to the table, but it may just be that your credit, which you probably have worked very hard to keep stellar since your discharge, will take a hit when the foreclosure goes through. I would lean toward the short sale route BUT if you had a 2nd mortgage, or judgment liens, do not be surprised if you are asked to come up with some money to get them to issue a release.
The purpose of a foreclosure is for the senior lien holder to scrape inferior liens off the title so that when it goes to sale people will be willing to bid more money to get title; otherwise, a bidder would take the property subject to those inferior liens and have to pay them off.
I realize you want to be 100% sure of doing just the right thing. May I suggest that in today's economic environment there are no certainties--it is a wild-west atmosphere. Some people get principal reductions, others do not; some get "cash for keys" and others do not. There are no "rules of the road" that we can rely on.
I wish you well.
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