What Happens After You Surrender Your House In Bankruptcy

You have finally come to the decision that you are willing to surrender your house.  This decision did not come easily.  You probably spent years dreaming about your house, years paying for your house, possibly years going through a failed loan modification process and finally decided to file bankruptcy.  If you decided to surrender your house you may wonder how the process works.

Your attorney will ask you your “intentions”  in regards to your property, if you want to keep the house or surrender the house.  This main question may dictate the direction of your case, chapter 7 vs Chapter 13, loan modification vs no loan, potential adversary actions that you may have etc.

Your attorney will still need all of your documents for your home, such as your title/deed information, mortgage statement and an appraisal for the property.  At the 341 meeting, the trustee will determine if there is equity in the property.  If there is no equity, the trustee will surrender his/her interest in the property and will file a report that “abandons his/her interest”.  The trustee’s report of abandoning his interest in your property DOES NOT MEAN, that you are no longer the owner of the property.  Upon the filing and discharge of your case, you are still the legal owner of the property.  You may be legally relieved from paying the mortgage but you will still be considered the legal owner of the property.  You will be responsible for any utility charges that accrue, tenants living on the property, maintenance, homeowner’s insurance, HOA fees, and the list could go on.   This is not what you were intending.  The bank will proceed to lift the automatic stay and move to foreclose on your home however you want to avoid the additional negative reporting on your credit report and the years of legal action that will follow.  You must remove yourself from ownership responsibility.  This can be accomplished by a deed in lieu of foreclosure or filing a motion to abandon your interest in the property via the bankruptcy court.  Please know that additional work must be done to surrender your home after you file bankruptcy.