Many of our clients have this particular question with if they are filing bankruptcy and they are giving up or “surrendering” their house in bankruptcy. Our advice to our clients is to stay in the house until the foreclosure sale date. As a general rule, it takes quite a while for most mortgage companies to foreclose on a home. As a result, if our clients move out prior to the foreclosure, then they still may be responsible for utilities, insurance and any city or municipal requirements such as lawn care and maintenance. Because of that, the most prudent solution is for clients to stay in the house until the foreclosure sale date which actually is the mechanism by which mortgage companies transfer properties back to themselves.
Several bankruptcy courts have held that there is no discharge injunction violation if a mortgage company refuses to either foreclose on a property or release a lien on a residence. If a mortgage company refuses to or fails to foreclose on a home, then, as a general rule, the buyer of the property will remain responsible for the payment of taxes, insurance, and maintenance. What that allows for, then, is essentially a free pass to allow people to live in a property without paying a mortgage payment and to simply keep up the taxes, insurance, and maintenance on the property. This is the best course of action for anyone considering filing either a chapter 7 or chapter 13 bankruptcy and giving up or “surrendering” their interest in a home. Our advice is to save the money you would use to pay the mortgage principal and interest and put it aside for moving costs and a down payment for your new place if and when the mortgage company finally forecloses.
Every situation is different and the facts of every situation should be discussed in detail. Please free to contact our office nearest to you to meet with one of our licensed attorneys to discuss your particular situation in detail.