Today’s question is one of the really difficult ones in bankruptcy: I filed for bankruptcy two years ago and the house is still in my name. Can I surrender it to the bank? Who is responsible for the house?
“Surrender” is a term of art in bankruptcy which means that the debtor gives the collateral back to the secured creditor. Upon doing that and getting a discharge the debtor has no more obligation to the creditor, even if the collateral is worth less than what is owed. For example, suppose you have a car worth $10,000 and you owe $13,000. If you surrender it, you give it back to the bank and walk away.
Things are more difficult with houses. With a car you can drive it down to the bank, hand the keys to the bank manager and leave. Not so with a house. Usually the bank forecloses on the house after you quit making payments, which is what you want if you intend to surrender. But with the real estate crash several years ago banks got way behind on their foreclosures and in some cases (probably thousands) simply forgot about some properties. Especially with bank mergers and closures it’s not at all unusual for a loan to be overlooked for years, maybe forever.
So where does that leave you, the homeowner? You can continue to live in the house as long as the bank will let you, without paying anything. But if you want to leave the home, you have a problem. It’s still in your name. That means you’re still responsible for taxes and maintenance. If someone gets injured on the property, slips on the ice, for example, you could be liable as the owner. If the house falls into disrepair you could possibly face criminal charges.
If you’re in a house you don’t want after a bankruptcy the best thing to do is consult with your attorney about how to get rid of the house. Because property is governed by state law, the situation in Utah might be different from that in Idaho or Nevada or anywhere else.