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Short sales advantageous for older borrowers

Elderly family members can sometimes become unintentional drains on family resources. When an older person loses a spouse, for example, he or she must often turn to children for physical and financial support. In many cases, the elderly relative would be best served to declare personal bankruptcy to protect the assets of their children, though other options exist to regain financial footing.

What if, for instance, an older person with dementia is left widowed by the death of a spouse? That person's properties could be in jeopardy, including residences, vehicles and other assets. Children are often left to sort out the legal and financial implications after such a tragedy, which is complicated by the inability of the surviving spouse to manage his or her individual affairs.

In many cases, a short sale for the elderly person's home is advisable. This is particularly true if the person's children cannot pay for the mortgage on their older parent's house. Short sales are a viable option for people of all ages who are in danger of foreclosure, but they can be a great boon to an elderly person who seeks to protect individual resources. Short sales involve the quick return of a home to the lender who financed the mortgage. People who participate in short sales may not receive the full value of their home from the bank, but they will be able to avoid both foreclosure and bankruptcy in most cases.

Foreclosure can be a dangerous decision because the borrower could be left responsible for the unpaid balance after a foreclosure sale. That is, if a $200,000 home sells for $150,000, the borrower would still be on the hook for $50,000 to the bank. In a short sale, the borrower does not owe any additional money back to the lender.

Bankruptcy may also be eliminated as an option because the older person has other assets that eliminate eligibility for Chapter 7 or 13 provisions. Elderly people seeking bankruptcy assistance should consult a qualified bankruptcy attorney.

Source: Fox Business, "Short sale or bankruptcy for mom with dementia?" Justin Harelik, Feb. 12, 2013.

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