Really, there is no reason in the world to do a short sale. That’s where you sell the house to somebody for less than what is owed against the house.
The purpose of a short sale is to get you out of the property without you having to pay any mortgage deficiency. But since you’re having a bankruptcy, you can’t get hit with any deficiency.
Hence, no point to spending all the time, effort and money it takes to get a short sale through.
The broker will make a nice commission off the deal, the bank will get paid on the deal, and the buyer will get a fantastic bargain on the house. Everybody makes money on a short sale… except YOU!
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Fellow attorney here and I agree 100%. Even in a Chapter 13 bankruptcy, it’s about the same result. You can only do it in a Chapter 13 via an agreed order. Otherwise the court considers a short sale to be a “cramdown” in violation of section 1322(b)(2) of the bankruptcy code. So unless it’s an agreed order, the bankruptcy court won’t just grant your motion. Much easier to just surrender the house back to the mortgage company and walk away clean.