Mortgage after bankruptcy

[kajeno2001]

I am hoping someone here can help me out. My husband and I were discharged from a Chapter 7 sometime in early October. Since that time we have continued to make our mortgage payments on time. We did not reaffirm our loan.

We are in Maryland if that helps.

We are possibly separating/divorcing in the next couple of months.

What happens when we stop making payments on the house? I know eventually they will foreclose on the property but when that does happen will my husband and I be held liable for the negative loss the bank took (i.e. 1099) or be held responsible at tax time (pay taxes on the negative balance) because we have continued to make the payments even after bankruptcy?

The other question was about what happens to the property taxes and homeowners insurance once we stop paying. Those items are currently escrowed into our mortgage payment?

Thanks again for your help.

[LadyInTheRed]

If you did not reaffirm the loan, you will have no liability to the lender for a deficiency. If you get a 1099 reporting forgiveness of debt, you will not have to pay tax. You will attach form 982 to your income tax return and check the box indicating that the debt was discharged in bankruptcy and therefore the "forgiven" debt is excluded from taxable income.

If the bank doesn't pay the property taxes, they will become a lien on the property to be paid by whoever buys the home. The bank will also insure the home to protect itself from loss. But, you as the record owner can still be held liable if somebody is injured on the property. The bank's insurance won't cover your liability.

If you have HOA fees, then you do have personal liability to pay the fees. If you stop paying, the HOA might sue you or they might put a lien on the house.

You can live in the house until the bank forecloses and evicts you. One of you should take advantage of the free rent and stay as long as possible.