Foreclosure of Property After Bankruptcy

**Parikshith** · 07-22-2012, 07:32 PM

My question involves bankruptcy in the state of: California

I am finding out some information to help out my friend, as his attorney is not very helpful.

He filed Bankruptcy chapter 7 with central district of California in April 2012. He owns one primary residence in LA and one rental property in Northern CA. He lives in LA (primary residence). The problem is regarding this rental property. On the rental property he owes 1.2 million. The present value of the house is 0.5 million. He stopped payments on this property from around April 2011 (last year). Notice of default was filed from the bank in December 2011. The bank started to foreclose process by trying to sell the property in auction in April 2012 but postponing it because of Bankruptcy every two weeks from then. The bank is feeling anxious to sell the property as soon as the Bankruptcy gets discharged. He would like to keep this rental property. Can he do it? Will he still have control over the property after the discharge or it is up to the bank? Can he do short short sale?

Thank You

**Mr. Knowitall** · 07-23-2012, 04:01 PM

If this is truly an investment property, he should be talking to his lawyer about a Chapter 13 bankruptcy and cram down.

**despritfreya** · 07-23-2012, 06:31 PM

In the context of a Chapter 7 of course he can keep the property. . . if he brings payments current before the property is foreclosed or gets the lender to agree to a loan modification before it is foreclosed.

If he wants to keep the property and HAS NOT received his discharge he can file a Motion to Convert to a Chapter ELEVEN not a 13. He is over the debt limit for a 13. From there he can propose a cram down of the value to $500,000.00.

If he wants to keep the property at the cram down value and HAS received his discharge but his case HAS NOT been closed his only option would be to get the Trustee to abandon the asset. Once abandoned he could then file a new case under Chapter 11.

If he wants to keep the property at the cram down value and HAS received his discharge and the Trustee HAS closed the case he can file a Chapter 11.

All options must be accomplished before the lender forecloses. Warning. . . Chapter 11s are not simple, can have many issues, least of which is the ability of the creditor to take an 1111(b) election. He needs to discuss this with a well qualified attny.

Short sales are just stupid.

Des.