A friend of mine filed for Chapter 13 bankruptcy. He has a rental property that he decided to "let go" or should I say foreclose. His current loan balance, I think on that property is around $340k. The current market value of same property is around $250K.
My question is would the lender/bank go after him for $ he owes on rental even if he filed for Chapter 13?
4 Answers from Attorneys
From the facts stated, we assume the loan was taken prior to filing. Hence, there's no distinction between that debt and other dischargeable debts, which may be permanently eliminated upon completion of the chapter 13. Even if the bankruptcy was filed prior to the foreclosure, it is still a prepetition (before filing) debt that is subject to discharge (cancellation).
Above is general information, not legal advice to be relied upon independent of retaining counsel. It may not address all considerations for the questioning party or reader.
No because of the Chapter 13 (if he gets a discharge) and also because in California there is no deficiency after foreclosure by the holder of the deed of trust that has the property sold at a trustee's sale. Therefore, with or without the bankrutpcy your friend would not be liable for any shortage (called the "deficiency") if the house is sold at a trustee's sale which is the way foreclosure is done in California 99.99% of the cases involving residential real property. There are other possible legal reasons why he would not be liable for the defiency as well so don't need to worry about it.
Assuming the loan preexists the chapter 13 filing, there is no personal liability at the completion of the plan and discharge. The lender's only recourse is whatever funds are realized from the sale of the property.
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