Transfer of ownership of surrendered assets

[Boscoe]

Another secured debt question. After you surrender a property secured by debt (i.e. mortgage), how soon does the ownership title transfer and therefore how soon are we off the hook for taxes, insurance, and other ownership costs? Does this differ between ch 7 and 13?

[BassBoy]

Are you talking about letting the house go to foreclosure?

[Boscoe]

No, listing it as an asset with a mortgage. Since it is non-exempt, it would be surrendered (as opposed to redeem or reaffirm). When does title change and in practice, how quickly does this occur? In a Chapter 7, it would need to be quick, right?

[BassBoy]

Don't know if I can tell you how long title transfer will take. It depends on how fast everyone "moves".

Another question: Are the property taxes and insurance included with the mortgage payments?

[SinkingFast]

If this is a house we're talking about, then you'd need to check on the Foreclosure Laws of your State.

The mortgage Lender will have to Foreclose, or you'll have to offer a Deed In Lieu of Foreclosure that the Lender accepts in order for the Lender to take the property over into their name.

The Lender can't do anything with the property until they can legally take title to the property. That will require getting your name off the Deed/Title first.

[Boscoe]

Yes, taxes (but not insurance) is included with the mortgage. So what does "surrender" the home actually mean? If I don't redeem or reaffirm, I surrender the asset. If I have equity in it (i.e. I can't sell it in this market in time to avoid the bk), then when am I free of it with no strings attached?

[SinkingFast]

When the Lender get's the Title/Deed in their name. That's when you are no longer legally responsible for the property.

As long as your name is on the Title/Deed, you need to maintain insurance on the property to cover you for liability against "slip and fall" and such. If someone falls down on the property and breaks a leg, while the Title/Deed is still in your name, you're liable.

For the Lender to take Title/Deed over into their name, they are either going to have to Foreclose, or accept a Deed in Lieu of Foreclosure from you.

Just because you offer a DIL does not mean the Lender will accept. The Lender has the right to choose to accept or decline a DIL.

You're gonna have to research your State's Foreclosure Statutes to determine how long the process will be. Could go quick. Within 90-120 days or so. Could be a protracted, Judicial process that lasts 18 months or longer.

A lot depends on the State and the wording in your mortgage instrument. If you have a "Right to Sale" clause or all Foreclosures are Judicial.

[Boscoe]

Property is in Florida - I am in Massachusetts where I would file. Do you know the law which would apply here?

[SinkingFast]

New Law says you file where you live. That would be Mass for the BK filing. But if you've lived in Mass less than 2 years, you'll use Florida BK Exemptions.

The Foreclosure is gonna go by Florida Law.

We were in the same spot as you. Lived in one State. Had to move for a job and left a house behind in another State. Tried to sell. Wound up in Foreclosure. We're filing in the New State using the Old State's Exemptions.

Hubby had moved on ahead of the family and been here a year when we realized that BK was gonna be the way for us. When we were Consulting attnys we were told I had to be a resident of the State here for 6 months before we could file. So that's a question you'll wanna address as you Consult with attnys.

I know one Member, Titan, moved from Florida to Tennessee. His attny used Federal Exemptions for his BK filing. So it may depend on the attny or the Court as well as how long you've lived in the New State.

[Boscoe]

No, I've lived in Mass for quite awhile. This is a vacation property that I have equity in, but if I can't sell in next few months I will be in trouble.

So I will file in MA but they would handle the property in Florida. Do you know the law there? If I "surrender" the asset, what again exactly does that mean? If the trustee abandons it, the lender would automatically take it via DIL? What if they don't? Isn't that what BK is for, to wipe out debts that you can't handle?

[SinkingFast]

OK, I gotchya.

Yep. Florida Foreclosure Laws will apply to the property located in Florida.

You can surrender the house in BK and be discharged from any financial responsibility for the property. As far as debt goes. Poof! That's gone. You won't be held accountable for any deficiency if the property does not bring what you owe.

Liability is a whole seperate issue.

You cannot just surrender a house. Odd as it sounds, you just can't. The Lender has to legally take the Title/Deed to take ownership from you. That happens one of 2 ways. Either the Lender Forecloses or you offer a DIL that the Lender accepts. Once the Lender Forecloses or accepts a DIL, then the Lender can legally take possession of the property.

As long as your name is on the Title/Deed, you are liable for the property. If a shingle blows off the roof, hits someone, and causes them to need stitches, while your name is on the Deed/Title, you're liable for that. If they were to slip on a wet sidewalk and break an arm, you're liable.

As long as the property remains legally in your name, be sure to maintain liability coverage/insurance on the house to protect yourself.

[SinkingFast]

Here's a perfect example for you.

BassBoy filed BK. Surrendered his home in BK. He's been discharged. The house hasn't been Foreclosed upon yet.

http://www.bankruptcyforum.com/showthread.php?t=9863