•Lender can review a short sale offer while the loan is in an active bankruptcy. However,

to complete a short sale and issue the approval letter, the bankruptcy documents must be filed

and approved by the court. Any final agreement will require bankruptcy court approval.

•Homeowners should consult with their bankruptcy counsel about how short sale programs could

affect their mortgage and their bankruptcy case.

•When a loan is in bankruptcy, there is an automatic stay, also known as a “hold,” of any collection

activity placed on all debts that are included in the bankruptcy filing. Before the short sale specialist

can discuss loss mitigation options, including a short sale, with the homeowner, Bank of America must have written authorization from the homeowner’s bankruptcy attorney on the law firm’s letterhead. This is in addition to the Bank of America Third Party Authorization Form, which gives the bank permission to speak to the homeowner’s bankruptcy attorney and listing agent.

If homeowners are currently in a bankruptcy proceeding, or they have previously obtained a discharge of their mortgage debt under applicable bankruptcy law, all communication and notices from Bank of America are for information purposes only. They are not an attempt to collect the debt, a demand for payment, or an attempt to impose personal liability for that debt. Homeowners are not obligated to discuss their home loans with Bank of America or enter into a short sale agreement or other loan assistance program. Customers should consult with their bankruptcy attorney or other advisor about their legal rights and options. To complete a short sale for a loan in bankruptcy, Bank of America must receive one of the following releases issued by the bankruptcy court:

•Granted Motion to Sell*

•Granted Motion for Relief from Automatic Stay with noted short sale negotiation*

•Dismissal

•Discharge with Abandonment, Closing Order, Final Decree, Trustee No Asset Review

*A granted Motion differs from a requested Motion.

Note: If homeowners receive a discharge under a Chapter 7 bankruptcy proceeding, discharge releases the homeowners from personal liability for certain specified types of debts. The homeowners are no longer legally required to pay any debts that are discharged.

The discharge is a permanent order prohibiting creditors from taking any form of collection action on discharged debts, including legal action and communications such as telephone calls, letters, and personal contacts. Although homeowners are

not personally liable for discharged debts, a valid lien (a charge upon specific property to secure payment of a debt) that has not been made unenforceable in the bankruptcy case will remain on the property after the bankruptcy case. Therefore, a secured creditor may enforce the lien to recover the property secured by the lien.

Yes. Two additional documents are needed for a short sale that is in active bankruptcy:

•An attorney authorization letter from the bankruptcy attorney. This should be on the law firm’s

letterhead, and give Bank of America permission to speak with the homeowner. It is separate and

in addition to the Bank of America Third Party Authorization Form, which gives permission from

the borrower for us to speak to the bankruptcy attorney and the listing agent. If the homeowner

and the attorney prefer, the short sale can be negotiated through the attorney rather than the

homeowner. If the homeowner does not have a bankruptcy attorney, we will not need the attorney

authorization letter.

•A release issued by the bankruptcy court (see page 3).

An approval letter cannot be issued until the release from

the bankruptcy court has been received(see page 3). Once the release is received, the file can be submitted for approval to the appropriate investor(s) and/or mortgage insurance company. The file will then follow the normal approval process

to ensure it meets investor requirements.

An approval must follow the direction provided in the release by the bankruptcy court. That is why a short sale will not be approved until a court order permitting the sale is received.

Yes. However, any funds going to the homeowner through state incentives or other incentive programs

must be properly disclosed and handled in accordance with bankruptcy legislation and local rules.

For assistance or questions for processing any short sale fill out the form below.

[contact-form-7 id=”155″ title=”Contact form 1″]