I’m going to surrender my home in bankruptcy. Should I keep insurance on it?
This is one of the really hard questions about real property and bankruptcy. Exactly how do you surrender your house? A car is easy: take it to the bank and leave the keys with the manager. But you can’t just send the keys of your house to the bank. The reason for that is that as long as the house is in your name you are responsible for its upkeep. If someone breaks in and is injured you could be sued, as strange as that sounds. If the sidewalks get icy and someone falls you could be liable. If the yard becomes a nuisance the city could fine you. Sometimes you can’t just walk away.
The smart thing to do is to work with your lender. Tell them you’re going to surrender. Give them a date by which you’ll be out. Put this in writing so there is a record of you having told them. Then get out by that date. It might also be worth it to keep insurance on the house as long as it’s in your name. Some banks move quickly to protect their collateral, but I’ve seen cases where the bank didn’t do anything for several months and even a year or more. It depends on what your risk tolerance is. Talk to your attorney about your specific situation.