Advice on voluntary surrender of home to lender - The Bills.com Blog

My wife and I have recently moved into a new home. The mortgage was secured in her name. We moved from a home in another town that I own. I am "upside down" on the mortgage. Consequently, real estate companies won't list the property for sale. I've tried 2 differnt times to sell the house on my own with no luck. I finally found someone to rent the home, for $500 less than my monthly payment. My wife has been diagnosed with a serious illness. The burden of loosing $500 a month has now become a major financial issue. I think I could convince the person renting the home into a buy situation if I could lower the price a bit (maybe $10,000). Do you think I would be a candidate for a "short sale"?

You will need to speak with your lender on this. Discuss your situation with them and provide detailed documentation about your current financial hardship to see what you are able to work out, but keep in mind that there is still a chance they might not agree. All the best.

My father filed chapter 13 bankruptcy last year. The house was initially locked into the bankruptcy, but after a great inability to pay the bills, he surrendered the house as well. Now the mortgage company is suing him for the money owed, and the house is technically pulled back out of the bankruptcy [surrender.] Is there anything that can be done to save the house? He has tried to contact the mortgage company several times, but has failed to get in touch with anybody because they keep getting bought out by other companies and do not seem to want to comply. Please help, I'm desperate.

I would strongly encourage your father to speak with his bankruptcy attorney about this situation. Generally speaking, people who have filed for bankruptcy protection are protected by an automatic stay from any collection action taken by their creditors, regardless of whether or not the creditor was included in the bankruptcy filing. Any creditor who wishes to move forward with collection action is usually required to file a motion with the bankruptcy court to have the stay lifted so it can proceed with its collection activity, which could include a lawsuit. If this creditor is proceeding with collection activity while a stay is in place, the bankruptcy court may be able to intervene on your father’s behalf, though is attorney would need to notify the court of the situation so it can take appropriate action. Your father may also be able to amend his bankruptcy case to include the deficiency balance on his home (the amount left on the loan after the home is sold at auction, which is an unsecured debt) in his Chapter 13 case, though limitations do exist regarding what can or cannot be added, and when such amendments can be filed. Your father needs to discuss this option with his attorney to determine if including this debt in his bankruptcy case is a possibility. Finally, your father may be able to convert his Chapter 13 filing to a Chapter 7 filing, which may allow him to fully discharge this debt and his other unsecured debts. Most people file Chapter 13 to protect their assets, which usually means a home; since your father no longer owns a home, Chapter 7 may be a better option for him. I strongly encourage him to consult with his attorney as soon as possible to discuss the various options available to help him resolve this debt. I wish him the best of luck!

I have tried for the past two years to sell my home with no success. Finally in August I had an offer to do a short sale. My mortgage company has declined this offer. I have been in foreclosure for approximately 4 months now. I have no recourse but to surrended my deed to the lender. How do I go about doing this and besides my credit being ruined, what other reprecussions will I face. I reside in the state of New york

Unfortunately, surrendering your home to your lender, often referred to as a "deed in lieu of foreclosure," may have much more serious affects than causing damage to your credit rating. New York law allows lenders to obtain deficiency balance judgments against borrowers whose home loan is not covered by the proceeds of the foreclosure auction. In order to obtain a deficiency balance against you, the lender would need to file a motion your county courts requesting a judgment for the difference between the amount you owed on the mortgage and the amount which the lender receives for the property at auction. The problem for many consumers is that foreclosed homes tend to significantly less than their actual value, which often leaves the former owners liable for significant deficiency balances. You can read about state foreclosure laws by visiting http://www.foreclosures.com/pages/state_laws.asp. Not all lenders pursue former homeowners for defiency balances on foreclosed homes, but this is a possibility you must consider before you decide how to proceed. Given the difficulty of your financial situation, I would strongly encourage you to consult with an attorney in your area to discuss the options available to you. For example, filing for Chapter 7 bankruptcy protection may allow you to surrender the property without the worry of incurring a deficiency balance. Your attorney should be able to analyze your overall financial situation and explain the risks involved in negotiating a deed in lieu agreement with your lender. To read more about foreclosure, you can visit http://www.bills.com/foreclosure/. Also, if you would like to learn more about bankruptcy, you should visit http://www.bills.com/bankruptcy/. I hope this information helps.

I have been in bankruptcy for the last 2 years, and every year or 6 months my bankruptcy payments have increased. I am living at a poverty level and barely able to pay the utilities/food/gas bills, I only get 210.00 out of my paycheck every two weeks. I have had to obtain a second job to just stay alive. So I want to surrender my home back to the mortgage company (seeing that I do owe more than what I originally got the loan for) but I may have a potential buy in a few months. My lawyer advised me that if I am in foreclosure and I have a option to do a short sale during the foreclosure procedures, then the mortgage company may consider it...is that true?

Short sale is definitely an option if your mortgage is upside down. You need to work with the mortgage company as you will need their approval for the sale.

I am considering surrendering my home and the biggest concern and question I have is since I will be responsible for the difference between what I owe and what they sell it for, what will keep them from selling it for almost nothing?

The lender has two incentives here: 1. they have a legal obligation to sell it at a market price (and if you think the price is eggregiously low, you could alway sue them to prove that it was a market price and that the broad marketplace had an opportunity to bid on it), and 2. they take much less risk if they can sell it for the highest amount that they can in a reasonable period of time. I hope this helps, but banks almost always try to get the highest market rate for repossessed assets.

I live in Oregon, I bought a house in April of last year and carry a mortgage of 131,000, I live alone. I thought I was getting a great deal because the same units sold for as much as 210,000 at the end of 2005 when they were built, mine was a foreclosure that had never been lived in. Heck, it would cost 140k just to replace it for insurance purposes. It turned out not to be such a great deal, the town is fast become a slum, crime and vandalism have become rampant. To make matters worse I have a next door neighbor that is easily one of the most objectionable people I have ever met and the straw that broke the camel's back was his standing in my driveway yelling hate speech at 9:00 last Sunday evening. Invented new terms for perceived sexual orientation. He claimed to be on the HOA board and so can make problems for me. He is full of it of course, but aside from being a white supremacist with a criminal record I just do not want to live next to this loser. Well, the house (zero lot line 3 story townhouse) that appears to be attached to mine was also a foreclosure and has never sold. The bank has dropped the price to 99,900 and still few lookers no takers. Another unit up the street sold a few weeks ago for 91k. This means I am at least 40 thousand in the red just since last April. I cannot sell, I cannot even list it, nobody will represent it. I can afford the payments, but I cannot continue to live here. The two units across from mine are identical and have been on the rental market 7 months since last mid-summer with no renters interested at 800 a month. My payments are just over 1000. I cannot file bankruptcy till at least May of next year since I filed in 05/2003 after a disastrous house fire in NY. My mortgage is backed 100% by USDA Rural Development, and they say they do not go after people after a foreclosure. I do not believe my income is attachable, my income is a VA disability and social security disability as a disabled veteran. This is driving me crazy, I worked so hard for years after the bankruptcy to restore credit score(last month it was 707) and I do not want to abandon my place, but what else can I do? If the payments could be covered by rents I might have bit the bullet and become a landlord, but I am not going through that again and lose money every month on the deal (my income is not taxable so I do not file with the IRS, I cannot get the tax advantages of mortgage deductions). I am not getting the appreciation we all expected were normal, it makes no economic sense for me to stay. Given the intolerable neighbors I really must move. I am a dual citizen of the EU (Ireland) and USA. I really do not have a question unless any of you can provide information you think will help, but I just want to say that as the credit and economic debacle has unfolded I see us reaching a point where millions will be in the same boat as me, that there will be no economic incentive to repay our loans and no way to sell, it will become a downward spiral, with millions trapped in houses they wish they could move out of.

We are currently in chapter 13 and have not been able to keep current with payments. We have decided to go ahead and surrender our home--and in the meantime there has been a move from the trustee to dismiss our 13 --if we convert the 13 to a 7 --would that be our only option at this point? The home is in my name only --not my husbands. Could we surrender the home that is now worth 40,000 less than what we owe? Will Wells Fargo try to collect?

You cannot file for chapter 7 at will, you need to qualify for it through the means test that they administer. If you surrender your home, and include any deficiency balance that remains, in your bankruptcy filing, then your lender cannot come after you to collect on it again.

need information on surrendering my home, and will i get to keep my other assets?

You will need to speak with your lender about it. It is not as simple as handing over your keys and walking off as you will have to deal with all the paperwork. If in case your home is not worth enough to pay the loan back in full, you might still owe a deficiency balance on it. The creditors can pursue collections on this balance just like another unsecured debt. You can read about the collection laws for various states here: http://www.bills.com/collection-laws/.

i live in ohio cleveland area.we filed chapter 13 but no longer can make house payments can we just surrender the house to bank without legal reprucusion from bank.

If you cannot continue to make the payments, you should talk to your attorney and the trustee. If they agree, you could be free and clear. If you also have other debts (credit cards, etc) you may want to also inquire about converting to a chapter 7 and just get a clean slate and a fresh start. Good luck Anna.

I lost my job sep 08, my husband lost his dec 08, i am currently working out of our rental home and will be receiving a 1099 this year. we are a family of 5, that used to be fairly comfortable. we made several bad choices with homes and vehicles. currently we have mortgages on 2 properties - 1 which we have at least got rented. but can not afford to live in our other home. it has been on the market since i lost my job in sep. our family has gone from having extra money, good credit, and doing as we please to barely surving. we should be paying in quarterly taxes but havent been able to, were in the early stages of forclosure, have no health insurance and have called one lender asking if we can voluntarily give back 1 vehicle. Bankruptcy scares me but i dont see much daylight at the end. all this being said, if we file bankruptcy it would be on 2 vehicles (1 @ 15k and 1@ 17k, 2 houses (1 @ 67k and 1 @ 280K ) we have tried to short sale the 280K house but country wide is not working with us, 1500.00 medical and 2500.00 credit card debt. we were crazy enough to get 2 sub prime mortgages at once and now were stuck. when figuring the means test do they figure bills we should pay but cant like health insurance? and is there a bankruptcy that allows you to give back everything- but not have a trustee and a repayment plan. something that is really a fresh start?

Katie, thanks for visiting Bills.com. As much as I can understand the hardship that you are going through, I am not a bankruptcy attorney and I do not know much about the means test. The best thing to do is to consult with an attorney who is licensed to practice in your state. I do know that if after the means test, if you qualify for a Chapter 7 type of a bankruptcy, it is basically a fresh start. You can read more about bankruptcy at http://www.bills.com/bankruptcy/

We filed Chap 7 and was discharged in Dec 2008 we included the house in the bankruptcy, now in May we got papers in the mail from the oringinal lender( they were put in the bankruptcy) that they are suing us for the amount owed $170,000.00 and there attorney fees. I called our lawyer and she said that this is normal, and if we get a summons to appear in court don't go. To me this doesn't sound kosher, can they sue us, garnish my husbands wages? This is what they are threatening to do.I am scared, we even gave up our car.Please give me some advice, thank you.

You state that you included your home in your bankruptcy case, so I assume this means that you surrendered the home during the proceedings. Once you surrendered the property, any balance on the mortgage should have been treated like an unsecured debt and discharged along with your other debts. In my experience, it is definitely not normal for a creditor to sue a debtor for a debt that has been discharged, though it occasionally happens due to record-keeping errors by the creditor. To resolve a lawsuit filed for a discharged obligation, the debtor is usually only required to file a response showing that the debt was discharged and the judge will dismiss the lawsuit. The fact that your attorney told you not to appear seems strange to me, as failing to appear usually will result in a default judgment, which could lead to wage garnishment, property liens, etc. Ｉencourage you to contact a different attorney for a second opinion to make sure that you are appropriately responding to this lawsuit. I wish you the best of luck!

What happens when the current property is owned by a divorced couple and is currently being rented and there is a second mortgage? Any clues on how this may play out?

Is you question pertaining to the disposition of the property as a result of the divorce settlement agreement, a possible default on the second mortgage, the renters not paying the monthly rent, or something else? There is no law requiring a divorced couple to dispose of property they own. To the contrary, they may agree to hold the property jointly until a date in the distant future, and then decide how to dispose of the property. If a rental property is cash-flow positive, then a second mortgage is not necessarily an issue.

We recently filed ch. 7 bankruptcy. We are surrendering our properties (one residence. one rental). I understand about the stay of action and that the lenders have to petition the court to lift the stay so they can foreclose. My question is: 1. Can we stay here until they do? How long until a foreclosure will occur after filing for ch 7? If we were to abandon the properties are we under any obligation to inform the lenders or "turn in the keys"? Thanks for your help.

The best piece of advice that I can provide is to speak with your attorney and ask him the questions posed in your comment, as he or she should have experience working in your the bankruptcy courts in your federal district, and has probably worked with the judge handling your case in the past. This experience will give your attorney a much better feel for what the judge will expect of you and how much time the process of lifting the stay and foreclosing on the property will take. The amount of time largely depends on how busy your local bankruptcy court is, as that will determine when the judge can schedule a hearing on the lender's motion to grant relief from the automatic stay. As for staying in the home until the stay is lifted and the lender foreclosures, I know of no requirement to leave the home early becuase you are surrendering the property in bankruptcy. You are also under no obligation, to my knowledge, to notify the lender if you do choose to leave sooner, though I think that you probably should; there is no reason to create unnecessary enmity between you and the lender, and there is no good reason I can think of to not give the lender notice. Again, I am not a lawyer and I don't know enough about your situation to provide you with any concrete advice, so it is imperative that you discuss these questions with your attorney before making any decisions on how to proceed. I wish you the best of luck!

I am currently trying to sell my mobile home that is located in a mobile home park. I previously had it rented to my step-daughter but she has moved out. I am considering surrendering my mobile home that is vacant. We do not have a lease but pay the lot rent from month to month. Will I be responsible for the lot rent if I surrender the trailer back to the lein holder? The lein holder is not the person that owns the mobile home park.

I have house that has 2 mortgages 80/20 through the same lender, was originaly NovaStar, which sold the loan to Saxon. My 80 loan had it rate raised above the allowed terms that were in the loan. There were other issues witht he loan. I hired a lawyer, which was able to obtain a restraining order and an injunction, the mortgage company was not allowed to touch my credit or the house until after trial. This was in Feb. In June they sold the house via a foreclosure auction. They are now offering to either reverse the sale and proceed with the court case, or take back the house and report to my credit a line showing "property voluntarily surrendered", with no further reporting on my credit. As of now my credit shows 1 late from January, and otherwise current. I beleive voluntarily surrendered is a code 95. They will also release me from any deficancy, and I will drop my case. My question is will this be a major hit on my credit, and how long will it be there for? From what I read it looks like it may show up as a minor deficency because it is current. Is voluntarily surrendered by itself a "major credit hit"? My median score right now is a 700, with the exception of this 1 late payment everything else is excelent, and once this house is off of my credit, my debt to income ratio will be amazing. Thanks in advance, Scott

"Voluntarily surrendered" is not much better than an involuntary repossession, in my humble opinion. Also, in my opinion, such an entry is further evidence you are dealing with a hardball creditor. There should be no entry on your credit report at all -- zip, zero, nada -- until the entire litigation is settled. Under these circumstances accept nothing less than a "paid in full" entry on your credit report. After all, you would still be a customer of theirs had they not violated the terms of the mortgage, right?

Generally speaking, if you are on a month-to-month lease, you are obligated to give the landlord one month of notice you are vacating the premises. However, if you are leaving a mobile home on the land, then even though you are not in the mobile home your mobile home is occupying the space. In that situation, it would be fair for the landlord to continue to expect someone to pay for the occupation of the space, even if you are not living there. Each state has resolved this type of question differently. (California in particular has a body of law devoted to the rights and liabilities of tenants in mobile home parks.) I suggest you speak to an attorney in your state who is experienced in property law who will be able to determine your rights and liabilities under your state's statutes and court cases.

My husband and I are not sure what we should do??? We need to know if we should Voluntarily surrendered are home and keep the credit debt or file bankruptcy and add all debts. If we do a bankruptcy then what kind? I know we should get a lawer but what kind?

I am not sure I understand all of the issues you mentioned. Accordingly, I suggest you consult with an attorney in your state who is experienced in bankruptcy law. To find such an attorney, call your county bar association. Ask if they have a list of attorneys in your area who practice bankruptcy law. Alternatively, go to the Web site for your state's bar association, and see if the state bar has such a list. Talk to several attorneys before you pick one. Work with an attorney who you think will have the time an patience to answer your questions.

I in bankruptcy and have surrendered my condo back to the bank. My question is what is surrendered back is it only the walls, floors, etc or appliances as well?

Generally speaking if something such as an appliance is considered a fixture then it is considered to be a part of the property. If for example, a stove top is fixed to a counter then it would be considered a fixture. On the other hand, a free standing refrigerator would usually not be considered a fixture. Ultimately it depends on the appliances in question. Obviously things like floor tile, carpeting, molding, and light fixtures are affixed to the property and would stay.