Legal Question in Real Estate Law in California
Real Estate Sale + Bankruptcy
If I have to ''short-sell'' my home, and have a chapter 13 bankruptcy to pay off, (the net profit is not enough to pay off both the lender and the trustee), who takes priority in the payoff -- the lender or the bankruptcy trustee? Thank you!
2 Answers from Attorneys
Re: Real Estate Sale + Bankruptcy
There will be no profit probably. Since the lender is agreeing to take less than the loan amount, they will probably have in the short sale agreement a provision that you are not allowed to make any money on the sale
Re: Real Estate Sale + Bankruptcy
The lender is a secured creditor and would have priority over most other claims, including I believe claims of the trustee for his expenses in administering the bankruptcy - if that's what you meant. If you meant to ask whether the trustee can assert his powers of avoidance to knock out or demote the lender's claim to that of an unsecured or general claim, I'd think that would depend upon the recency of the obligation being foreclosed. If it was incurred and recorded more than 90 days before the Ch. 13 petition, I'd think the trustee lacks any avoidance power.
I hasten to add that this question deserves an answer from a bankruptcy attorney, which I am not - I'm in real estate law - and I may be wrong or I may misunderstand your question.
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