If you’re surrendering your home in bankruptcy, how you handle the property and all the expenses associated with the property is important. Let’s take a look at the responsibilities you have when surrendering your home in bankruptcy:
Keeping your utilities paid is important because in some cases the failure to maintain payment can result in property damage for which you may be held responsible. For example, if you file bankruptcy in the dead of winter and you live in a cold state, failure to keep your heat on could cause winter damage such as burst pipes which are very costly to repair.
If you’re struggling to pay your utilities, look into your city’s utility assistance programs. Many states and cities will deeply discount your utility bill if you have low- or moderate-income.
If you’re paying your property taxes as part of your mortgage, when you become delinquent on your mortgage payments you will naturally also become delinquent on your property taxes. Once you file bankruptcy, all the property taxes that accrued before your filing will be part of the bankruptcy case. However, any taxes that accrue after your filing are your responsibility until the lender takes the property and pays off the taxes. That’s why it’s important that you get the timing right on when you file bankruptcy and surrender your home to the lender.
Many borrowers pay their insurance through their mortgage, but when they stop making mortgage payments their house becomes uninsured. If the homeowner takes no action to keep the home insured they become vulnerable to all types of catastrophe. If someone is hurt on your property while it is uninsured, you could be personally sued for damages. Also, if the home is destroyed in a fire or natural disaster, without insurance you could face a lawsuit by the lender. If you are unable to pay for insurance on your home, immediately contact the lender and let them know. In some cases, the lender will get insurance on the property just to protect their investment.
Just like property taxes, any homeowner association (HOA) fees you accrue before filing bankruptcy will be included in your case. However, any HOA fees accrued after your filing will remain your financial responsibility. Depending on when you surrender the property, this can be a huge financial problem. For example, if you remain in the home for four months after filing Chapter 7 bankruptcy, then you will have four months of HOA fees that are due. Working with your attorney, you may be able to negotiate a settlement on those fees.
If you’re planning to surrender your home in bankruptcy, work with your attorney to make sure you’ve fulfilled all of your obligations.