Surrender 2nd Home in Chapt. 13?

[seanjpatel]

I had a question about Surrendering your 2nd home (rental) in Chapter 13. We had our 341 Meeting and the Trustee Objected to my wife and I having this Rental Home due to the fact our mortgage is so high and the we rent it out for about $600 less than the mortgage. So we decided to Surrender it.
My question's are:

1. What happens to the Tenants who have a signed lease until 12/10?
2. Do I keep paying the mortgage and receiving rent from tenants?
3. How long will it take for the mortgage co. to takeover the home?
4. Is this a rapid process or is this a long slow process regarding surrendering?

We live in Tucson, AZ.

Thanks for your help and info.

[justbroke]

1. What happens to the Tenants who have a signed lease until 12/10?

Nothing probably. They just keep paying the rent. The Trustee will probably take the money. The rents are usually "assignable" to the bank/lender as well. You may want to tell them that the home will go into foreclosure and that they will probably be able to stay through their lease. I just don't know.

2. Do I keep paying the mortgage and receiving rent from tenants?

No. You would stop paying the mortgage. It's useless and a waste of money. However, keep collecting from the tenants. The Trustee may want these payments.

3. How long will it take for the mortgage co. to takeover the home?

No one knows the answer to that, except the mortgage company. And, you can't force them to even collect the rents.

4. Is this a rapid process or is this a long slow process regarding surrendering?

The "surrender" is easy. Getting the bank to move... can take many many months.

If you're working through an attorney, you really need to work with them. They'll understand the local procedures and Trustee practices. I'm thinking the Trustee would want those collected rents to give to unsecuerd creditors. You'll just have to ask.

As for the property, the lender will file and receive relief from the automatic stay and then proceed with foreclosure under the terms of your State's non-bankruptcy laws. However, they may not be able to proceed until you are in default for at least 90 days, they send a notice of deficiency demanding you cure the default in no sooner than 30 days, and then accelerate the note and sue for foreclosure (depending on your State). That means, you're probably at least 120 days (4 months) from any foreclosure anyhow.

The trend has been that this takes longer than that time, but, again, it depends on your State, whether you have a deed of trust or a mortgage and whether the process is judicial or non-judicial.

[TexasEx]

We have a very similar situation. We have a rental home in Nevada. We filed for 13 and were confirmed in early Feb. The rental is being surrendered in the bk. We continue to collect rent and have for the past year (it has been a year since we stopped paying the mortgage on it). The tenants know and actually want to buy the house but want to wait until it forecloses (they felt they would get a better deal than doing a short sale) no contract as they are going month to month.

Lawyer advised me to continue to charge rent but to inform the management company that is handling the rental to advise tenants to move out within 90 days and return deposit. Since tenants want to buy the house they do not want to move so they continue to pay rent (I had to send the letter to cover my back in case trustee brought this up).

Lawyer also advised to have money collected since filing available to turn over to trustee in case the issue was brought up during the 341 meeting. The issue was never even mentioned so I get to keep money. They continue to pay rent every month and the bank has not moved a finger (see my other thread asking how long this takes). If AZ is anything like NV (and you also have BofA as your lender) this could take a long long time as just broke indicated (I'm living proof of that).

Don't know how much longer this will take but meanwhile I just continue to save the rent money into my emergency fund. It has been one year since stopped paying the mortgage and 3+ months since we filed. Bank continues to pay the taxes and insurance out of escrow account that has been depleted for a while.