No one desires to lose a home because of financial setbacks, but many factors including predatory lenders and nasty adjustable rate mortgages are making it impossible for many people to keep their homes. If you have been forced to file for bankruptcy protection and decide that surrendering your property is your best option, the timing of when you actually move out of the house that your plan to surrender is crucial to your fresh start.
Because you own the house until the house is foreclosed, you must continue to keep the house up – even if you have already moved out. This includes maintaining insurance, keeping the yard mowed and just looking out for the general well being of the property. Keep in mind that banks can take between 4 to 12 months to foreclose on a house after the first payment is missed. Although this is just an average, sometimes it takes even longer.
Also, bankruptcy will only discharge debts that were incurred before your case was filed. So if any claims arise against you or your property after your bankruptcy was filed, the bankruptcy will not discharge those claims. These potential claims can be from any number of unfortunate events and include trespassers, vagrants, city citations (for not mowing the lawn), general negligence, and other forms of civil liability. If you choose to vacate the house prior to the bank resuming possession of the property and someone gets injured on your property (this could be a child playing in the tree house or a trespasser that starts a fire in the garage), you could still be liable for any claims as the property owner. And if the injury occurs after your bankruptcy was filed and before the bank forecloses on your property, you may get stuck with the debt.
Your best option is to remain in the house until the bank is ready to take it back. Banks typically take possession through a foreclosure sale, which transfers the deed out of your name. By staying in the house until this process is complete, not only will you have peace of mind in keeping the property maintained, you will also save money. For example, during the 4-12 months that a bank takes to foreclose on property, you will not have to make mortgage payments. So you will be able to save the usual mortgage payments for future necessary living expenses. These future living expenses may include a down payment on another house or a deposit for an apartment or other residential lease. Otherwise, you may risk being liable for claims that arise after your bankruptcy was filed and jeopardize your fresh start.
For more information or if you have any questions regarding this blog, feel free to give us a call at 913-422-0909. We will be happy to answer your questions. Just call us to make a free appointment with one of our attorneys in one of our three locations in Olathe, North of the river or Independence. W M Law is here to help.