Need Advice: Short Sale While in Bankruptcy.

Owners are in Bankruptcy. I worked with them 3 years ago on a short sale on their previous residence. They bought another house 2 years ago and have filed bankruptcy this time.

I have contacted the bank’s (SunTrust) Loss Mitigation and they transfered me to Bankruptcy. So far, I have gone back and forth from homeowner’s Bankruptcy attorney to the bank.

Bank won’t speak with me until the court releases and the court won’t release until I have a contract.

Any suggestions?

The reason that banks sometimes won’t negotiate when a property is in bankrutpcy is that bankruptcy laws prohibits them from pursuing collection actions against the borrower during bankrutpcy. While it is true that they cannot speak with the borrower, you are not the borrower, and if they were thinking straight, they would realize that they can speak to you. However, they like to have these “abundance of caution” policies to cover their butts.

Here are some approaches that I know for dealing with the bankruptcy situation:

  1. Use Bill Twyford’s NLP (Neuro-Linguistic Programming) approach: (to loss mitigator) “I totally agree with you … Bankruptcy screws everything up. Let me ask you this … I know the homeowners pretty well, so I could get them to file a motion to dismiss to drop the bankruptcy when you and I work something out on the short sale. Can you see the benefit in your job of doing this? You’ll be the only one closing deals in your office. ___, let’s do the right thing, and start on this one now, OK?” (Bill’s scripting is priceless)

I’ve used this one successfully. It made me over $65K on one deal (my first deal, actually).

  1. Explain to the loss mitigator that you understand that the bank is not allowed to pursue collection actions against the borrower while they are in bankrupcty. Politely point out that because you are not the borrower, they can continue to negotiate with you. Point out that the seller has already agreed to sell the property to you subject to the short sale, and that you can get them to dismiss the bankruptcy to allow the short sale to go through once you get it approved.

  2. If 2 doesn’t work, continue by saying that you’ll have the homeowner’s attorney write a letter to the bank granting them explicit permission to continue negotiating with you on the short sale. If the homeowner filed their own BK, I suppose you could have the homeowner write the letter.

I hope this helps.


Find out which chapter they filed - Chapter 7 or 13.
Go to PACER to find out the appropriate information. Can you verify that they have no equity in the house? If they dont have equity then send the appropriate document to the trustee to get it release from the bankruptcy. The banks will be more responisive it the house has been in bankrupcy.