Many debtors choose to surrender their home before or during bankruptcy so they can get a complete financial start without all the mortgage debt associated with their home. But what are some of the things a debtor must do before they surrender their home?
Below are a few tips:
- If you are surrendering your home to the lender outside of bankruptcy, you need to make sure that you will not be pursued for the balance of the loan. Surrendering a home or falling victim to foreclosure does not release the debtor from the obligation to pay the mortgage debt associated with the home. However, some mortgage lenders may be willing to forgive the outstanding balance of the mortgage.
- If you are surrendering your home during bankruptcy, you don't need to worry about being liable for the balance of the mortgage. However, you are responsible for maintaining insurance on the home until the mortgage lender takes possession of the house. Unfortunately, this can take up to 12 months or more, so you could be stuck paying insurance on the property for months after you surrendered the home and your bankruptcy case is closed. The reason you need to keep insurance on the home is because you could be held liable if someone is harmed on the property or if something happens to the property while it is in your possession.
- Make sure that you secure the property and leave it in good condition. A few homeowners who have lost their homes to foreclosure or surrendered the property outside of bankruptcy have left the home in disrepair out of anger. If you maliciously damage the property before surrendering it to the lender, you could be held liable for those damages.