Questions about liquidation of home surrendered in Ch. 13

[greenthinker]

Hi All,

We have about 22 months to go in our Ch. 13 plan, and last year we amended the plan to surrender our house. Since then, we have been working with B of A on a modification to get a principal reduction, and finally just got turned down (no surprises there). So, we're prepared to give up the home when the time comes, since we're severely upside down and the mortgage payments are too high.

My understanding is that, since the plan was amended to surrender the property, then any deficiency amount would be discharged. Is that correct? And, does the property have to be liquidated before we can receive our discharge? I'm asking because I would not be too surprised if we're still in the house 22 months from now when we complete our plan.

Thanks so much!

[tobee43]

we did a 7 and not a 13 however, i would think the situation would be close.

we listed our home and surrendered it. the legal definition of surrender in this case simple means making the property available. while ( and in our case over 5 years later) the mortgage lender may chose not to take position, or take it back. that really has nothing to do with you, other than the fact the house remains in your name until the deed changes hands which only happens when the property is re sold.

it does Not delay your discharge or the close of your case. by listing the house in the bk you will not be responsible for any deficiency. hopefully LITR or JB will give you a bit more input about the way it works in a 13. i'm sure it will work out in your favor.

[despritfreya]

My understanding is that, since the plan was amended to surrender the property, then any deficiency amount would be discharged. Is that correct?

Yes.

Does the property have to be liquidated before we can receive our discharge?

No. This is an issue for the lender. Not your problem but, if there is a HOA you must continue to pay the HOA until the property is foreclosed or otherwise out of your name.

Des.

[sophieanne]

What happens to a person's ability to purchase a house after surrending a home in Chapter 13??? I appreciate all the information that is shared on this site.

[sophieanne]

Bump..
just curious what the answer to my question is...

[despritfreya]

If you can find a lender that will lend while you are in an active 13 depending upon procedure in your jurisdiction, you would either need to get a court order allowing the purchase and new debt or a letter from you Trustee. The problem will be finding a lender however, such is not impossible - have one right now where client, who is in a Confirmed 13, is purchasing a new home. Lender wants the blessing of the Trustee. Not a big deal.

Des.

[sophieanne]

Thank you Des...I wanted to know if the ability to buy a house would end or not. Sounds like a challenge but a lot of things in life are. Thank you again!

[greenthinker]

Thanks tobee and des for your replies...I appreciate it!

One follow-up question: Does the lender wait until the bankruptcy is discharged to begin foreclosure proceedings? I was under the impression that once it is in the plan to surrender the property, the lender can begin foreclosure at any time. But, the account manager that I spoke with today told me that nothing would happen until after discharge. That would mean that we can remain in the house for another 20 months without making any payments. If that is the case, we will really be able to build up our savings!

[despritfreya]

Does the lender wait until the bankruptcy is discharged to begin foreclosure proceedings? I was under the impression that once it is in the plan to surrender the property, the lender can begin foreclosure at any time. But, the account manager that I spoke with today told me that nothing would happen until after discharge. That would mean that we can remain in the house for another 20 months without making any payments. If that is the case, we will really be able to build up our savings!

Unless your jurisdiction has a local rule that a surrender provision in the Plan automatically lifts the protection of the automatic say, if the lender wants to proceed with foreclosing it will have to file a Motion for Relief From the Automatic Stay. If it doesn’t do that then it cannot proceed until entry of the discharge

Some lenders will wait and wait and wait, while other will file the Motion quickly and once the stay is lifted will wait and wait and wait. Still others will move fast in lifting the stay and foreclosing. There is no way to tell except that until the stay is lifted you are in a holding pattern.

Des.