Posts: 93
Registered: ‎06-26-2009

CH 7 BK> Short Sale = deficiency liability?

I'm caught between a rock and a hard place!!!


I have a rental property that was IIB/discharged.  I tried to sell it to a relative post BK however the appraisal came 25k short of the loan balance. (130k balance; 105k appraised).

Deal went dead.


Now I want to do a SS and I recently consulted a CDPE in the area.  He stated that in order to do the SS, I would have to have the mortgage lien "removed" from the BK estate. Hence once removed I, the seller would open the doors for the $ deficiency if the property were sold SS.


Is this true?  I have reached out to my BK attorney for clarification and he has not yet responded. I really need to sell. Renter/relative has been paying mortgage since inception.. and are continuing to pay today.


Another obstacle - Arms Length Transaction rule.  Renter who wants to buys is a relative.


Anyone experienced something like this or know of someone?  Appreciate all suggestions and advices!


Thank you.

Community Leader
Senior Contributor
Posts: 4,788
Registered: ‎03-06-2010

Re: CH 7 BK> Short Sale = deficiency liability?

No, the SS after BK does not open the door for a deficiency.


Talk to your BK attorney. Find another CDPE.


The Arms Length Transaction rule is enforced. You can't sell to a relative unless the bank is paid in full and its not a short sale.

Posts: 93
Registered: ‎06-26-2009

Re: CH 7 BK> Short Sale = deficiency liability?

Understood points 1 & 2.


Think you've already answered my question on a different post.. Regarding - Arms Length Rule; are there absolutely no exceptions to selling to a relative?  I've made an earnest effort in trying to sell via regular P&S but the appraisal did not come in and deal went dead.  appraisal 105k; loan balance 130k.

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