Mr. Chung has been a partner with Chung & Press, P.C. since its formation in 1993. Mr. Chung has a diverse business and commercial law practice that focuses on legal issues involving bankruptcy, real estate, and corporate law. Mr. Chung received his undergraduate degree in 1984 from the University of Virginia, and his law degree from The George Washington University National Law Center in 1987. Mr. Chung is admitted to practice in the Commonwealth of Virginia as well as numerous federal courts. Mr. Chung is active in the community, and has served in the following capacities:
Director and Founding Member of the Virginia Chapter of the Asian Pacific American Bar Association
Member, Board of Directors for the Asian and Asian Pacific American Alumni Network of the University of Virginia.
Member, Board of Trustees for The McLean Orchestra since 2003, for which he was the President for the 2006-2007 season.
Past Member, Board of Directors of the George Washington University Law Alumni Association.
Director, McLean Youth Football, Inc.
"Short Sales" -- What Do I Need To Know?
In the course of our bankruptcy practice, we are often asked to give advice regarding the pros and cons of a “short sale” of one’s property. Simply stated, a “short sale” is when an owner of property is attempting to sell his or her property for a sales price that is less that the mortgage on the property. In this situation, the owner will have to obtain the lender’s approval for the sale, whereby the lender will agree to release its lien against the property and receive a payoff amount that is less that the loan amount. There are several issues that one must consider in a “short sale” situation, as exemplified by the following questions.
1. Do I need to consult a lawyer before selling my house in a short sale?There are a number of legal and financial liabilities that may arise as a result of a short sale, including potential tax obligations. It is important to get proper legal advice to discuss these issues before proceeding with a short sale. Depending on each individual’s circumstances, allowing a property to go to foreclosure and/or filing for bankruptcy may be a better option than a short sale
2. Will I be responsible for paying the difference between my mortgage balance and the short sale price?If you sell your property for a price less than what you owe on your mortgage, this results is what is called a “deficiency”. Unless the lender provides you with a complete written release of personal liability for the deficiency or the deficiency is discharged in bankruptcy, you will remain legally obligated for the deficiency. It is also important to know that depending on the applicable statute of limitations, the lender could have years before it takes legal action to collect the deficiency.
3. What happens if the lender releases me from liability for paying the deficiency and cancels the indebtedness?A cancellation of indebtedness will be treated as taxable income by the I.R.S. (which means you must pay income taxes on the amount of debt cancelled) unless it is excluded under the following circumstances
a. The seller/taxpayer is insolvent. In general, insolvency is determined by considering the value of all of a person’s assets. If the value of the assets is less than a person’s liabilities, then that person may be considered insolvent
b. The cancellation of indebtedness is for a qualified principal residence indebtedness. This generally applies only to purchase money indebtedness, the original loan for the purchase of the property. Any mortgage debt that resulted in a cash out to the borrower would not qualify
c. The indebtedness is discharged in bankruptcy.
If the cancellation of the indebtedness will result in a significant tax liability, then filing for bankruptcy may be a better option. Other tax issues related to capital gains taxes may also be present. This is way it is a good idea to consult a lawyer before proceeding with the short sale.
4. Should I continue to pay my condo or HOA fees while the short sale is pending?In general, it is a good idea to keep the condo or HOA fees current. If you fall behind, the owners’ association may assert a lien for the fees against the property or file a lawsuit for breach of the association’s bylaws. Any association lien or judgment against the property will have to be paid off or otherwise released prior to or at settlement. In addition, you will need to obtain not only the lender’s approval of the short sale price, but also for the total minimum payoff to the lender. If the HOA fees are allowed to accrue, this may result in an insufficient payoff to the bank, which would prevent the short sale from going to settlement. In any event, condo and HOA dues must usually be brought current at settlement.* Please click here, if you would like to view previous "Ask the Expert" questionsAsk Question, Get Your Answer
Bob Katz
Mr. Chung has been a partner with Chung & Press, P.C. since its formation in 1993. Mr. Chung has a diverse business and commercial law practice that focuses on legal issues involving bankruptcy, real estate, and corporate law. Mr. Chung received his undergraduate degree in 1984 from the University of Virginia, and his law degree from The George Washington University National Law Center in 1987. Mr. Chung is admitted to practice in the Commonwealth of Virginia as well as numerous federal courts. Mr. Chung is active in the community, and has served in the following capacities:
