surrendering house in chapter 7

[UpsideDownMI]

If you surrender a house in bk, do you hand house over to the lender directly or does the trustee handle it? Thanks.

[justbroke]

It depends.

If the home has equity which is not exempt, and you are surrendering the home or otherwise unable to exempt all the equity, the Trustee will sell the home and divide the proceeds as per the exemptions.

If the home has no equity, and you are surrendering the home, and the Trustee doesn't want it, then the lender will go through the process to get relief from the automatic stay, and then proceed through the normal foreclosure route.

Suffice it to say, that there is not much you need to do.

[UpsideDownMI]

Thanks for the reply. There is no equity. Can you just give the house back without them having to foreclose?

[StartingOver08]

No, the lender has to foreclose in order to clear the title properly. Take advantage of the extra time you will get in the home while you live rent free to stock up your savings before you have to move. (This is in the case of a home with no equity that the trustee does not want)

[justbroke]

Thanks for the reply. There is no equity. Can you just give the house back without them having to foreclose?

As my fellow Floridian noted, foreclosure will occur. However, this foreclosure, included within the Bankruptcy process, will not appear as a foreclosure on your credit report.

The same rules that allow you to own the home, and to keep the bank from just summarily "taking" it from you, are the same ones the Bank has to follow, even if you don't want it anymore.

The Bank has to follow the foreclosure proceedings, because, contrary to popular belief, the Bank does not own your home. In order for the Bank to take your home, they have to follow a lawsuit process known as a foreclosure. they need to follow the specific State laws regarding how it is done and whether they can execute a sales clause in the mortgage/note (a non-judicial foreclosure) or they need to go through a court (a judicial foreclosure)

It's really all for your protection, and it seems rather complex but it really is simple, but the process must be followed.

The sad part is, that even if you go through the foreclosure process... you could, possibly, still legally own the home for 6, 9, even 12 months (or more) due to the underlying State laws and the sheer problem the lenders have right now.