Surrendering Rental Property Dilemma

[h72]

Hello all. We filed a Chapter 13 two years ago come May, and we are in a 3 1/2 year plan (first it was a 36 month, then additional creditors showed up). We decided to accelerate with a high $2600/mo plan based on our children's ages and when they will be coming out of school. Our filing eliminated $70k of revolving debt that came as result of subsidizing credit lines for irregular commissioned income, delinquent real estate taxes and costly home repairs. The dilemma I have concerns a rental property we own that isn't breaking even. Since our filing we've become 2 years late AGAIN on the tax bills for that property, and $700 past due in water bills. My attorney advised at filing that we strongly consider giving the house to the BK court, but we felt it would be a safe back-up in case we needed to sell our home, and an opportunity to sell it when discharged, to help pay for college. When we brought up the topic last fall he told me we can still give the house back, which would also reduce our plan payments, but I've been reluctant considering its the only thing we will have equity in when we are done with this. Right now, with my $4000 income tax refund we can bring all the taxes and bills current, but then we lose our emergency savings account, with a car that is not going to last long.

Does anyone know what giving the house to the court means and looks like? I'm in finance so I know what a short-sale or foreclosure in lieu does. If we surrender the house will a longer-lasting mark be put on our credit? An additional public record? We are starting to realize the "equity" we would have in the house won't add up to much, considering the repairs we would need to make first. It would probably break even, and I don't know where we would borrow the money from when we want to prepare it for market. Any suggestions?

[tobee43]

welcome to the forum!


the legal sense of the term "surrender" in a bk actually only means you have made the collateral "available" to the creditor. they may proceed to foreclose which most times happens. when on surrenders their property or shows that intent, usually the property or lender, will do what they required by law to do to get your name off the deed. that happens only when the lenders sell it, take it back and write in off, and or foreclose of both. many do not understand that a DIL is just as bad looking one's credit report as a foreclosure or short sale. unfortunately, it is what it is. however, if you listed the mortgage in your bk and it is IIB, you can fight any credit reporting agency to remove it.