Can I Discharge My Short Sale Debt in a Bankruptcy?

Man looking at the envelopes

Question: My wife and I live in Forsyth County. We bought an expensive house during the boom years. My 401(k) was doing great, my company just gave me a fat bonus and my wife had a great job. But the recession put us in a tough place financially. I lost a lot of money in my retirement account, I lost my job, and my wife left me for her tennis coach.

So we did a short sale for the house. But the house lost a lot of money; it was extremely underwater. It sold for nowhere near what we paid for it. In fact, it sold for less than $300,000.00 of what we paid for it. And now the bank wants to collect on the money it is owed. There's no way I can ever pay that back. The bank has sued me in Forsyth County state court for the money that I owe plus attorney's fees. And they added interest, late fees and other charges.

Can I put the money that I owe on the short sale of the house into a bankruptcy?

Answer: Yes, you can have debt from a short sale (or foreclosure) discharged in a bankruptcy filing. It can be discharged under a chapter 7 or under a chapter 13. Whether you can file a chapter 7 or 13 should be determined by a bankruptcy attorney after conducting a financial assessment.

Because of the decline in home prices over the last several years, we have many clients who need to discharge debt incurred from a short sale of their house.

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