Discharged...want a fresh start.

[capamando]

Hello,

We were discharged (Chapter 7) a couple of months ago. We did not reaffirmed with Chase nor the second mortgage lender. We have yet to received any foreclosure paper..no lis pendens showing on the court records. Reports are saying that the average foreclosure is around 334 days. Some people may say..."what is the problem?" Well, the issue for us is that we want a fresh start somewhere else closer to family and friends and we are living in this limbo that keeps us from making a decision. We have been considering renting our house to someone willing to deal with moving out when the bank decides to proceed with foreclosing the property. Is there anything that would prevent us from doing this? Do I run the risk of any legal issues? What would be the best way to make this happen.

We are hoping that our we can get some advice from this great group of individuals here.

Thanks

[JackBondLove]

I would say that you would not only be committing landlord fraud (since you do not own the house anymore - the BK estate owns it), but BK fraud as well. And presuming you were completely upfront with the tenant, that tenant would have to extraordinarily desperate to rent from you (perhaps a drug dealer?), possibly opening up another can of worms, that the courts would not be lenient with, since you would have already shown yourself as a cheating huckster by renting the home that you just lost in BK.

[justbroke]

If the case is closed and the Trustee abandoned the assets of the Estate -- or the property was otherwise exempt -- I don't see where this is bankruptcy fraud. However, there may be a clause in the Mortgage (or Deed of Trust) entitled "assignment of rents" which assigns all rents to the Mortgagor (bank)... especially when you are in arrears.

Do people do this? Yes. Unfortunately it's almost epidemic in Florida. My own brother was the victim of an undisclosed foreclosure after renting a townhouse in Atlanta! The owner calls him in a panic one day and says that the new owners want the home at the end of the week. Sure... new owner... Bank of America!

Unless you intend to carry liability insurance on the property, this could be a bad idea from an insurance standpoint. You would want to make sure the property is fit. Additionally, a homeowner's association (HOA) may also have rights to the rents if you are in arrears with an HOA or Condo Association.

Again, do people do this? Yes. The only real issue is one of assignment of rents and whether that is really an issue in Florida. If the property was never purchased with a rental rider (or investment rider), then you probably didn't sign a specific rider assigning the rents. In either case, the bank (lender) needs to actually intervene. The rents are automatically assigned unless or until you are issued a notice of default (depending on the language in your mortgage).

As JackBond notes, you may attract some unsavory tenants if you do not keep your guard up and demand "typical" qualification for any new renter. Background checks, deposits, and credit checks should be required. Even if you're not going to weigh a person's credit, you should still see what they've been doing. (I'm not suggesting that the potential tenant need a 680 credit score to rent. However, a person who has been evicted, should not have the opportunity to rent from you. Remember, you're liable for the property.)

I might be inclined to contact a real estate attorney who specializes in rentals and bounce this off them during a free consult.

For what it's worth, foreclosures in Florida are now over 600 days. (Caveat... that number is based on the thousands they haven't processed in the last 2 years.)

[justbroke]

Actually, let me just add this. My post above is what I feel on the topic. However, as a formal landlord and trying to maintain a rental property while in Bankruptcy... I must say... just don't do it. It's not worth the hassle.

[dealingsdone]

I think it would be great if you rented out the house and pocketed the money. These banks have other things to worry about, you are small potatoes.

[capamando]

Hello,

I spoke with my lawyer and he said that as long as I don't require a lease I should be Ok. He also said that most likely the tenant would stop paying rent when the papers are served by the county.

[AngelinaCatHub]

I would say that you would not only be committing landlord fraud (since you do not own the house anymore - the BK estate owns it), but BK fraud as well. And presuming you were completely upfront with the tenant, that tenant would have to extraordinarily desperate to rent from you (perhaps a drug dealer?), possibly opening up another can of worms, that the courts would not be lenient with, since you would have already shown yourself as a cheating huckster by renting the home that you just lost in BK.

I really have to agree with JackBond. As you live in FL, you could live in the house under Homestead, until the legal process puts you out. This could be a very long time as the banks are very much behind in doing foreclosure and eviction. However, you are knowingly renting property that you admitted to letting go in bk. Your bk case could be reopened and then you will be scrutinized in spades on all your past history. For what that rent would bring you in, could be extracted back into your case as well as you could need a lawyer to get you out of potential trouble. This too looks like a fraudulent situation as even some people who have gone on vacation come home to a bogus rental by crooks who have the locks changed, and rent a vacant house they do not own, or even a furnished house. Imagine coming home and find a family in your home and the family wondering who you are too. That make two victims.

You don't want to join the ranks of such a scam as this. First, you are not telling your renter that you DO NOT OWN the house. THAT would be fraudulent under other laws too. Staying in yourself is one thing, renting to an uniformed person is tantamount to larceny and will cause trouble for you sooner or later. Reconsider. 'Hub

[bcohen]

My advice is to either live in the house yourself, or let a friend stay there for free. Any person who would be a good tenant--i.e. someone who is going to pay the rent on time and take care of the premises--is going to expect the protection of a long-term lease (a year or more) and isn't going to want anything to do with a house that is awaiting foreclosure. Only the most unsavory and/or desperate people would be willing to agree to rent a house which could be foreclosed at any time--forcing them to have to move at the drop of a hat.

I know that if I was looking to rent anything other than an apartment in an apartment complex, I'd be investigating the owner's mortgage status and verifying that the house is not in default or foreclosure. Also, I would expect a lease for at least a year so the owner can't claim that this is a "month to month" arrangement and drastically increase the rent or expect me to move with minimal notice.

[Flamingo]

Hello,

We were discharged (Chapter 7) a couple of months ago. We did not reaffirmed with Chase nor the second mortgage lender. We have yet to received any foreclosure paper..no lis pendens showing on the court records. Reports are saying that the average foreclosure is around 334 days. Some people may say..."what is the problem?" Well, the issue for us is that we want a fresh start somewhere else closer to family and friends and we are living in this limbo that keeps us from making a decision. We have been considering renting our house to someone willing to deal with moving out when the bank decides to proceed with foreclosing the property. Is there anything that would prevent us from doing this? Do I run the risk of any legal issues? What would be the best way to make this happen.

We are hoping that our we can get some advice from this great group of individuals here.

Thanks

See my highlight as to your sentence above...you sure do...and in order to protect yourself you need to fully examine (as others have stated on here) your mortgage paperwork that you signed at settlement. As long as the property is in your name it is your responsibility and if someone you allow to move in after you leave burns down the house and also gets injured or slips and falls on the property and you are not maintaining homeowner's insurance on the property, before title transfers to the property, you've got a big problem. Did your BK attorney mention that to you? Before you do anything, get a consultation with a real estate attorney in your state

[capamando]

Flamingo,

Thanks for your advise... My mortgage paperwork is fine. The other issues.... I understand the risks...but if I invite someone to my house while living in it and they slip and fall, would it not be the same situation? As far as homeowner's insurance my understanding and correct me if I am wrong, is that the lender places its own insurance coverage on the property as soon as mine expired. You bring up a good safe point when you mentioned a consultation with a real estate attorney.

[discouraged]

I sure wouldn't want to even worry about messing around with your bk. There have been so many of us that have had to do this, the chances of being audited are too great. Why would you chance it?

One neighbor had his son move in until the house was taken back from the bank because they had an opportunity elsewhere but that is the only way I would have another person in the house. That is the only thing I would consider at this point.

You do not want to look at bk fraud at this point. It's just not worth it.

[newbie2]

Flamingo,

Thanks for your advise... My mortgage paperwork is fine. The other issues.... I understand the risks...but if I invite someone to my house while living in it and they slip and fall, would it not be the same situation? As far as homeowner's insurance my understanding and correct me if I am wrong, is that the lender places its own insurance coverage on the property as soon as mine expired. You bring up a good safe point when you mentioned a consultation with a real estate attorney.

It wouldn't be the same, because once it is tenant occupied your homeowners insurance won't cover you, unless you have a policy that is for investors (landlords).

[capamando]

It wouldn't be the same, because once it is tenant occupied your homeowners insurance won't cover you, unless you have a policy that is for investors (landlords).

Newbie2,

Thanks for your input. I will be consulting a real estate lawyer this week. I am also considering letting my next door neighbor who will need a place to stay in the near future to stay for free. Is that also a problem? I hope not because if it is then I might as well move to Cuba!

[bcohen]

There is no problem with letting a friend/neighbor/relative stay in your house for free. You do not need special insurance for that, either. Frankly, if you have already been discharged from the mortgage, there is no reason to insure the house at all. If anything happens to the house (other than deliberate sabotage, of course) you are NOT liable. Any losses would be the bank's problem.

[capamando]

So....what else can we do?

Hello to all,

I want to thank you all for your advice. We took it into consideration and have decided to stay away from renting our house....not worth the risk....and it does not feel like the right thing to do. So...... my next question is what does one do if you have been discharged, did not reaffirm, want to move on with your life and move closer to family and friends and the bank has not even begun to foreclose on the property? What are our options with the lender? Is a short sale possible?

I would really appreciate any information regarding our situation.


Thanks