I Surrendered My House in Bankruptcy, You Mean To Tell Me I Still Own It?
Surrendering a home in bankruptcy does not clear title
Surrendering a Home in Bankruptcy Does Not Clear Title
Well not exactly as you may picture it, but yes, you will still technically own title to your home until the bank clears the title through foreclosure. National Bankruptcy Forum contributor Jay Jump wrote an excellent post a few weeks ago explaining how a Home Owners Association can still come after a homeowner for dues even after the property has been surrendered. How is this possible?
Let’s start with a little background information. Surrendering a home in bankruptcy is usually done as a preventative measure to protect against enforecement of a deficiency judgment post foreclosure. It is important to remember that if you owe more than your home is worth and a foreclosure ensues, in most states your lender can come after you personally for the difference between the sale price and loan amount.
Many consumers are surprised to learn that they owe money to the bank even after foreclosure. Filing for bankruptcy effectively eliminates your personal liability under the mortgage leaving the lender with only the collateral (your home) to take back. Understand, however, that when you surrender a home in bankruptcy, your lender will still go through the foreclosure process in order to clear title so that the property can be sold to a third party. Here is where the “continuing ownership” problem can arise. Jay Jump’s article offers the following example:
Example: Let’s say that the debtor decides to let the home go. We file the bankruptcy on Novemeber 1, 2008. We indicate in the petition that the debtor will surrender the home. The case goes smoothly and the debtor gets their discharge around February 1, 2008. Just before the bankruptcy, the debtor moves out of the home. This makes sense because after all, they are surrendering the home. Our good moral values tell us that if we are giving something up, we shouldn’t use it anymore! It makes even more sense, because the debtor believes that the bankruptcy will preclude them from finding a new place to rent post discharge. Fast forward to October 2009. The debtor has long since walked away from the home, they have started a new life, and they are happier after the bankruptcy. Suddenly, they are served with a summons and complaint for past due homeowners dues! The bank has still not foreclosed on the property and technically, the debtor still owns the house!
With the huge rise in foreclosures caused by the housing meltdown, banks are backlogged. They simply don’t have the time to foreclose on and sell homes as quickly as borrowers are defaulting. As Jay points out, this means that even though you have surrendered your house and moved on with your life, the title remains in your name.
You no longer have any obligation under the mortgage but financial responsibilities that “run with the land” such as HOA dues can still be enforced. When the bank sells your property to the highest bidder or buys it at foreclosure itself you will be divested of title and the responsibility for HOA or other maintenance issues. Until this happens, you will remain the legal title holder, a role that carries with it certain responsibilities. It is important to point out that the above example can vary by state law. Jay’s article discussed the current state of the law in Washington, if you have questions contact a local attorney.
Okay, I understand that my name is still on the Deed. We “surrendered” our Las |Vegas home via Chapt. 13 in order to return to our |Illinois residence. We vacated the |Vegas house as a “condition” of the surrender/bk. It has been one year since this occured. There has been NO communication from Chase except a letter noting the house was “vacant” and they wanted to know what provisions were in place for care-taking. They did get a relief from stay in Jan. 2011 and notified my insurance carrier who promptly cancelled the policy. We elected to let the bank purchase hazard as it was the same cost as what I would have had to pay. The question I cannot get an answer to (including from my attorney) is when Chase does foreclose what costs will be included in the 13 and what will not, EXACTLY. This is a simple question that no one wants to answer.
Thought a little more info would help. We did engage in a mediation program . The mediator found that Chase was not acting in good faith and was intentionally not cooperating with the state of Nevada. However, this did not get us any relief as I was unemployed and disqualified me for any relief. We acted in good faith with the bank and was never told this provision existed. Thru-out the modification process,which was encouraged by bank as the first modification contained bank errors, I was never told about this. I could go on and on…. It appeared the bank really wanted the house back and never intended to do a mod. I lost my job during this process and while I still have not been gainfully employed it amazes me at how incompetent the folks that are “supposed” to be are. Or are they??? Makes you wonder.
How long after the discharge do I have to move out of the house?
That all depends on how quickly your lender forecloses, in this climate there is no way to know.