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Who Is Responsible for My House After Bankrupcty?

The short answer is, “It depends …” An assumption is being made that the question means that the debtor no longer owns the house following the bankruptcy discharge. This has to be followed up by a few questions: What happened to the property during the bankruptcy?
o Was the bankruptcy Chapter 7 or Chapter 13?
o Was the property security for a mortgage or loan?
o Was the property seized or is it exempt?
o Was the property abandoned? Surrendered? Deed in Lieu”?
In Chapter 7 assets or property that secure a loan or mortgage are left alone if they are exempt. Federal bankruptcy law list items exempt from seizure. An exempted property’s mortgage or loan is intact following bankruptcy discharge, meaning that the mortgagee still owes the creditor the balance.
In Chapter 13 loans and mortgages are included in the reorganization of debtor payment catch-up.
In Chapter 7 a property can be seized if not exempt, secured or not.
In Chapter 7 a bankruptcy trustee can wait a number of months before deciding to seize damaged assets, waiting for the owners to repair and provide equity that is worthwhile for the trustee to use. It is the trustee’s obligation to assess what assets are available for seizure. One very important point for the debtor is to clearly understand that the timing of seizure is up to the trustee and the seizure can occur after the discharge of the bankruptcy. More than one person has experienced utter dismay and confusion when a property put on the seizure list goes un-seized, and then comes the discharge. The owner makes some improvements and repairs and now the property has some additional value, greater equity. This can be the point where the trustee seizes the property for liquidation and payment. Ignorance of the law is no help at this point. It is too bad and shame on the lawyer for not making this crystal clear to the property owner.

In terms of insurance and responsibility for damages, the one accountable is always the one who owns the deed, bankruptcy or not. Some home owners believe or understand, very mistakenly, that if they abandon property by surrendering the keys, that their liability for the property ends. Legally, until the mortgage company can legally claim ownership to the property, the mortgagee, the debtor, the surrenderer is still the one who is accountable and liable for any damage or loss on the property. This means that until a mortgage company or bank can legally foreclose on a mortgage and legally change ownership on the deed, finalized officially by filing the change, ownership remains with the mortgagee. Keep up house insurance in case of damage. If the property is seized, whoever has legal custody of that property is accountable for damage under “tort of abuse of property”. Other than this it is unclear as no experts or people who have experienced this have given any words around this aspect of losing property. This may be sufficient on this aspect of seize and accountability.

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