One of the provisions in Chapter 13 of the bankruptcy code allows a bankruptcy filer to cure a debt by surrendering property. And right now many filer are more than willing to part with their property due to declining house values, making Chapter 13 only second to Chapter 7 in the number of bankruptcy filings nationwide.
If you have filed for a Chapter 13 bankruptcy and decided you no longer want your home, you had better make sure the property transfer or foreclosure happens quickly, otherwise you will run into some problems.
Just because you’ve moved out you think your problems are over? Think again.
You are still responsible for vacant property – So you have filed for bankruptcy, moved out and notified the mortgage holder you are surrendering your property. Guess what? Until the title is transferred the property is still technically titled in your name.
Until then you can still be held responsible for those pesky homeowners or condominium association fees, any fines imposed by the city or town it is located in for failure to maintain the property and even any damage claims as a result of injuries or accidents that occur on the property.
If your bank is taking forever on your foreclosure, those pesky fines, fees and damages will just accumulate and put you in debt all over again. While it is true that the lender does have responsibilities for vacant property and some cities and towns have ordinances requiring banks to check up on and maintain foreclosed properties, it is not the same all over the US.
Transferring property to the bank through via Chapter 13
This is a problem you want to nip in the bud. There are some things you can do to make sure it doesn’t happen.
- You can include the surrender and transfer of ownership in the property to the lender in the terms of your Chapter 13 plan. You have to state that the ownership of the property will become legally effective in the bank at plan confirmation.
- Try to get the court to go along with this and include appropriate transfer language in the confirmation order so that no deed will be necessary.
- Record the court order in the official property records office of the area where the property is; don’t forget to include the legal description of the property and the name of the bank, just to hit it on the head that that is the right house.
Admittedly, this is still not a generally accepted method and some courts may allow it while others don’t.
Other options for getting rid of your property
If even with a Chapter 13 plan the bank still won’t take back the property then there are others things you can do to get rid of it.
For one you can negotiate a deed in lieu, short sale, or consent judgment of foreclosure. You can also lease the property and use the rent for maintenance, insurance, and city or homeowner’s fees.
You can also transfer the property by quitclaim deed, but remember that deeds should be recorded in the official property records. This must also be prepared and executed in the form required by the state, and most of all, this must be accepted by the new owner.