Short sale/deficiency question?

A friend of mine bought a house a few months before he got married for $180K in his name only. The value of his house subsequently dropped to around $70K later in the year. He decided to try for a short sale on his property and stopped paying his mortgage, solely because of the bad investment decision, not because he couldn't afford it. Meanwhile, he bought a house with his wife (under her name only) which is much larger at a much lower price. Now, the bank wants to come after him for the deficiency of $110K. He's been talking to bankruptcy attorneys and said he'll definitely have to file bankruptcy. He's hoping he can file ch7 and not have to pay anything, but I told him ch7 is a lot harder to qualify for now and he probably won't be able to. I'm thinking he'll have to pay a portion of it back, and taxes on the rest he doesn't owe, but I'm just an accountant so this is the extent of my knowledge on the subject. What's the likely outcome of this situation? Will he have to pay some or all of the money back? Will he lose his new house (doubtful) or cars? Both he and his wife have car loans through the mortgage lender so this is a big concern for him. Thanks for the help so far, this is in Cape Coral, FL. He does have some money in the bank, and wage garnishment was a concern for him. I told him not to take out the 3yr ARM, then not to short sale the home, but he's an idiot. He did all his banking with the lender, but they have frozen his accounts. So now he's trying to put everything in his wife's name to save his assets. I'm not sure if that will help. Also, the car loans are separate loans with the old house's lender, not the new lender.

5 months ago - 4 answers