What does it mean to "surrender" your home in bankruptcy?

Written By: Emil FleysherMay 9, 2012,
Florida Bankruptcy Attorney Chapter 7 Chapter 13
Surrendering your Home in Bankruptcy

When you surrender your home, that is assets or belongings in Chapter 7 Bankruptcy, you’re doing nothing more than indicating a willingness to let it go. You’re not actually giving it away to anyone. By filing for Chapter 7 Bankruptcy, you are attempting to discharge your obligation to pay certain debts. In return, you agree to surrender your property/home that is not classified as “exempt” under the bankruptcy laws as applied in Florida.

Trustee's Goal

However, the bankruptcy code does not force the bankruptcy trustee to take the non-exempt property. Instead, the trustee’s goal and obligation is to collect and sell the non-exempt property. That is so that some of that money can go towards paying back some of your creditors. If the trustee determines that taking the property, appraising it, storing it, selling it, etc., will not result in a worthwhile gain for the creditors, then that trustee will in all likelihood abandon his or her claim in the property. In other words, the trustee will probably not attempt to take your house in bankruptcy; if there is no equity to be had.

Bank Has to Obtain The Title

Furthermore, discharging your personal obligation to pay the mortgage doesn’t mean the bank automatically takes the title and becomes the owner of the house. Instead, the bank has to get title to the property. The bank can do this either by foreclosure (in state court and outside of bankruptcy), deed-in-lieu of foreclosure, short sale, or other legal means.

Unless and until the bank obtains the title to the house by one of these methods, the title remains in your name. And, the house is still legally yours. While you are no longer personally liable to the bank for any deficiency on the mortgage after bankruptcy, you do still own the property. That means you’ve got to comply with all local laws regarding ownership. Avoid zoning violations, keep the pool fenced, comply with your HOA, etc. If you get a citation after your bankruptcy is filed, you will be on the hook for it. If your home is in a condo or HOA, you may still be liable for post-filing fees that accrue.

Ultimately, deciding whether or not to surrender your house in bankruptcy is a personal one. And, it should be discussed with an attorney.

If you have questions about foreclosure, loan modification, bankruptcy; or other alternatives, please feel free to call my office at 954-484-9987. Or, send an e-mail to emil@fleysherlaw.com, or complete the contact form below.

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