short sale question

[GIacona]

What is the name of your state (only U.S. law)? NJ

I have been in the process of performing a short sale on my home since March. It seems to be taking forever. I have an attorney who specializes in these short sales and can get it done quickly once it's assigned to a case worker, but until that happens there is really nothing he can do but follow up with them.

We are detailing with 2 banks here. The big one is countrywide whom I owe 300K to and the 2nd is a small local bank (PNC) who I owe 35K to. I am also behind on my property taxes and haven’t paid since Nov of 2008. There is also an offer on the property which I accepted for 285K. Plus we are under contract and out of attorney review. This has also been sent to the bank.

My attorney told me since it's a conventional first mortgage countrywide will get the bulk of the money and the 2nd will get thrown a very small amount. He also told me countrywide will not seek a deficiency judgment against me. However with the 2nd lien holder it's hard to predict but I may have to agree to pay them X amount over 10 years for them to agree not come comer after me. Which would be significantly less than what I owe them.

Now just this week I get a letter that Bank of America who purchased countrywide. Just stating my account numbers, etc remain the same with a welcome package. There are 2 things that worry me here. 1. I do my personal banking with Bank of America and 2 maybe the possibility of them coming after me for a deficiency. If this short sale takes 6 months or longer I may be sitting with 10K in the Bank. So I am trying to figure out if I should stop my direct deposit and cash my checks until this is over, or just keep doing what I am doing

Also I have a large credit card debt that I was thinking of using my 2nd to pay for since it's not frozen yet and maybe my lawyer can negotiate me just paying half of it or something and settle it once the short sale is done. But I am having 2nd thoughts since they probably already know we are pursing a short sale. Maybe I should just man up to it and pay the cc debt? If I would have known I was planning on the short sale I would have used the equity a few months prior.

I am hopefully I wont get sued for a deficiency judgment by either lender I just want to get this headache over with and move on with my life. My credit has started to go down since there are missed mortgage payments and I am sure it's going to be worse. With the economey and the foreclosure rate hopefully the banks will understand and not persue a judgement after the sale.

I am not going to file bankruptcy unless I am forced into it. Hopefully I am not but this will be a last resort. If anyone has any advice on how to handle this, it would be greatly appreciated.

[Who's Liable?]

one thing for sure:
They WILL pursue ALL legal options to collect their balance. I would count on being sued for the def. balance. Most banks are now requiring the home owner to sign promissory notes for the difference owed.

I would also recommend pursuing ALL legal options in selling your home and work with the bank as much as you can.

There are also tax ramifications as well. The write off amount(difference on what you owe vs. what it sold for) is now TAXABLE INCOME if you do not purchase a new home within 3 years. I hope your short sale agent informed you of all this.

make sure you have a GOOD lawyer who can spell out ALL your options.