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How to do a Court approval bankruptcy short sale?

Lodi, CA |

I am the listing agent on a short sale that the bankruptcy trustee has given me a court approval to proceed with the short sale. Bankruptcy trustee indicated I do not have to deal with the borrower any longer, borrower has moved out. I am dealing with Chase with a second. I have an offer that will pay off the first and do a short sale with the second. Chase is asking me for the borrowers financial statement. How am I going to deal with this if borrower is no longer to be contacted?

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Attorney answers 3


To complete a short sale and issue the approval letter, the bankruptcy documents must be filed and approved by the court. Any final agreement will require bankruptcy court approval.
An approval must follow the direction provided in the release by the bankruptcy court. That is why a short sale will not be approved unless a court order permitting the sale is first received.

Hire counsel and good luck.


Everything now goes through the Chapter 7 Trustee. The Trustee is your client, not the former resident of the house. Ask the Trustee how to deal with this issue; he/she has dealt with it hundreds of times. (It's likely that he/she will tell you not to worry, since the property will be sold "free and clear" of all liens, and the approval of Chase isn't needed.)

The legal analysis of any situation depends on a variety of factors which cannot be properly represented or accounted for in a response to an on-line question. Any answer, discussion or information is intended as general information only, is not intended to serve as legal advice or as a substitute for legal counsel, and should not be relied upon in making any decision. If you have a question about a specific factual situation, you should contact an attorney directly.


Messrs. Weiss and Brinkmeier are saying different things, probably because your fact scenario is skimpy on details.

An OUT OF COURT short sale is described by Mr. Weiss. The Trustee (either Chapter 7 or Chapter 11) is your client, not the former resident. (If this is a Chapter 13 case, something is wrong.) You probably will need the Trustee to contact Chase to clear that up. Frankly, I am surprised the Trustee is dealing with this at all because there is NO money here for the Trustee. Most trustee's would just abandon the property back to the debtor, then you'd need to deal with the debtor (who might refuse to cooperate too, understandably). If it is NOT acceptable to Chase (for any reason), the short sale will probably fall apart because escrow cannot close without Chase's consent.

Mr. Brinkmeier is referring to a 363 Sale THROUGH THE COURT free and clear of liens. Again, no trustee would want to do this because it costs money to prosecute the motion and there is NO money going from the sale to the Trustee. Therefore, no trustee should do this. So, again, the short sale cannot go forward.

Frankly, this short sale looks very tenuous. If Chase will gain nothing, why should they even spend the time to process the short sale documents? Of course, if Chase holds the 1st AND 2nd, they might have some incentive, but you did not mention that.

Good luck.

If you need further clarity, please email me at MICHAEL@MIRELAND.US Answers to questions are for general information purposes only and do not establish an attorney-client relationship. This is not legal advice, simply information. You SHOULD NOT act on this information without consulting a competent bankruptcy attorney in your area and providing ALL relevant information.

Michael J. Ireland

Michael J. Ireland


One more thing I forgot -- the bankruptcy schedules themselves are SWORN to under penalty of perjury. They include all financial information any bank should need. Why don't you supply Chase with a filed copy of the Debtor's sworn financial statements filed in the bankruptcy court? Even if Chase wants it on "their form" (don't sign Chase's form) you could translate it and attach the Debtor's sworn financial records for support.

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