Some people chose to surrender the house after they file for Bankruptcy. Some because they can no longer afford it, some because it was a bad financial decision. However, they have a problem, one that is growing nationwide.
The mortgage company has not foreclosed, and they will not accept a deed in lieu of foreclosure.
You still own the house after your Discharge.
The problem is that you will still incur real estate taxes (if you live in a jurisdiction that taxes real estate), you will still incur and owe home owners association (HOA) dues. You will still be responsible for events that happen on the property, everything from people slipping and falling to county assessments for failing to mow the grass.
Some people move out, even though they are incurring taxes, HOA dues, and other expenses.
Some people beg the mortgage company to take the house.
For example, one of my clients tried to allow the foreclosure before she filed for Bankruptcy. We even called the day before the foreclosure, to make sure the foreclosure was still on. We explained that she was out of the property, and was not intending to keep the house. They called off the foreclosure, because the mortgage company did not want to be on the hook for the real estate property taxes, HOA dues and potential losses.
Remember, the owner of record is responsible for real estate taxes, HOA dues, and any thing that happens on the property.
So we waited to file the Bankruptcy, figuring they would reschedule some time soon. And we waited, and waited. Finally, my client was unable to wait any more, so we filed a Bankruptcy. STILL no foreclosure.
Another client filed Bankruptcy just before the foreclosure. Of course, the foreclosure was stayed. Then, they moved for permission to foreclose. The judge asked some questions about who owned the note. The motion was continued. The Chapter 7 the client filed was Discharged. Still no foreclosure. The case was closed. Still no foreclosure. But this client was a bit wiser. She continued to live in the house, without paying the (now Discharged) mortgage for 2 more years. It was only when they had foreclosed and filed for eviction that my client left.
Why did we advise her to stay that long? Because after the foreclosure sale, the Bank bought the house back, and did not file the deed of foreclosure. She still owned the house, so she paid the HOA dues and taxes, and maintained some insurance. The bank did not want the house, they wanted the money, and if the bank owned the house, they would have to keep the house maintained, keep the real estate taxes and HOA dues paid, and be responsible for the property. So she got to live there for almost free for almost 3 years, and the Bank did not have to pay the real estate taxes, HOA dues or maintain the property.
Our advise is that for most people, they should continue to live in the property until the foreclosure deed is filed with the county, and you can only be assured of that by being evicted. Pay the real estate taxes, pay the HOA dues, keep the water and electricity on, and keep the home owners insurance up to date. Don’t move out until you have to. The taxes, insurance, fees and dues are much less than rent anywhere, so save yourself some money. File the Bankruptcy if that is what you need to do, but don’t move out.
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Krumbein Consumer Legal Services, Inc.
5310 Markel Rd. Suite 102
Richmond, VA 23230