Who is responsible for home insurance and property taxes after discharge?

[capamando]

Hello to all,

In my previous post I mentioned that we finally had our 341...now we wait for the discharge and any issues that the trustee may come up with. Assuming that all goes well and we get our discharge sometime in April the question left unanswered for us (will ask our lawyer next week) is who is responsible for home insurance and the property taxes that are part of our mortgage payments. Since we are in default and did not reaffirm our mortgages(1st & 2nd)...I believe that the bank will get their own home insurance ...not sure about property taxes. If we continue to reside on our home until foreclosure, what if someone gets injured on the property or the house gets damaged by fire or a hurricane....are we liable?

We would appreciate a clarification..


Thanks

[dontburnthep]

You are responsible for both while the deed is in your name. The BK takes care of what you owe, but doesn't change the legal ownership of the property until foreclosure. Some banks do get their own insurance. Some banks also bring property taxes current to get a clean title to re-sell the property. YMMV.

[debee]

As dontburnthep points out, you are still the owner until the foreclosure. However, property taxes always attach to the land. You're not personally liable for them. The county will get a lien on the property. The bank has to pay them first from any sale proceeds. Not your problem.

You don't need to insure the building. If it burns down, the bank will be able to sell the charred remains and the sizzled lot. If they can't get enough money from the sale to pay off your loan, they can't pursue you for the deficiency because your personally liability will have been discharged in the bankruptcy. If they don't insure their investment, that's their own stupidity. Not your problem.

Get a renter's policy for your possessions and personal liability.

eta: If you have HOA, pay that until foreclosure because your personal liability remains post-bk.

[dontburnthep]

Get a renter's policy for your possessions and personal liability.

Wow, another thing our attorney told us incorrectly. Renters insurance? Really? We're still paying our regular home owners.

[PushRestart]

Great advice, yet more stuff I did not know about BKs....

[debee]

Wow, another thing our attorney told us incorrectly. Renters insurance? Really? We're still paying our regular home owners.

Sorry about your attorney. You're certainly not alone. Does your insurance provider know that the property is vacant? There might be something in the policy indicating that the coverage terminates for vacancies longer than a month (or whatever time-frame). You might actually be paying for coverage that you don't even have.

[capamando]

As dontburnthep points out, you are still the owner until the foreclosure. However, property taxes always attach to the land. You're not personally liable for them. The county will get a lien on the property. The bank has to pay them first from any sale proceeds. Not your problem.

You don't need to insure the building. If it burns down, the bank will be able to sell the charred remains and the sizzled lot. If they can't get enough money from the sale to pay off your loan, they can't pursue you for the deficiency because your personally liability will have been discharged in the bankruptcy. If they don't insure their investment, that's their own stupidity. Not your problem.

Get a renter's policy for your possessions and personal liability.

eta: If you have HOA, pay that until foreclosure because your personal liability remains post-bk.

Debee,

Great piece of information...so if I understand you correctly, if I intend to stay in the house until the bank forecloses on it...the best thing that I can do is get renter's insurance?

Thanks for clearing this for me and others..

So....what is the second secret? lol...

[debee]

Yes, renter's will protect you while you stay in the house, but you won't be wasting any money on the structure. When the bank gets lender-placed insurance, they name themselves as loss payee. You have no coverage of any kind in that scenario. So you take care of you.

ps. #2. ---> If you have an escrow account, you might have paid homeowner's insurance ahead by several months to a year. You can call the insurer to find out and plan to place a renter's policy into effect when the homeowner's expires. Good luck to you!

[KatieEllen24]

So if we don't reaffirm our 1st and 2nd, but intend to stay and keep paying mortgage and taxes, we don't need to pay the insurance on the house? Just for our belongings? Am I hearing that right?

[debee]

Katie, if you are doing a stay-and-pay, you need to keep the taxes and insurance current or you will be in default. If you want to stay in the house, keep current on everything.

In the case of the OP, they are letting the house go into foreclosure. In dontburnthep's case, the house is already vacant.

[KatieEllen24]

Thanks debee. Thought it sounded too good to be true.

[goodyphilips]

Its nice to know that BK takes lot of load off your back. It seems it worth it in every sense of term when nothing is working, economically, in our lives.

[tcreegan]

Hi all,

debee mentioned this, but just a reminder, don't forget to check to see if homeowners insurance is part of your mortgage payment. Almost all mortgage payments have an escrow set-up that the insurance gets paid out of. These payments are usually quarterly, but sometimes bi-annual or annual. Depending on the pay-out date, you might have months of insurance prepaid.

When we vacated the property, there was ~1month prepaid from escrow. We called our lender (GMAC) and gave them a heads-up we had vacated and were not picking up any insurance. They promptly put their own insurance on the place and sent a guy over to winterize and clean the place up.

I worry about not having liability insurance on it, since we are still on the deed. Its a risk we chose to take, almost over though, trustee sale on the 28th.

Tom in Colo

[daylate]

debee-Thanks for another great post. Your postings throughout this process have been a great help and very educational. Now to help you add to your legend (at least in my mind :-) ) if you go the renters insurance route after discharge if you have possessions there but don't live there can you still go that route?

if that is a no (and I'm thinking probably it is) then do you know of any companies that will just write liability insurance?

[debee]

I would just call your current/previous insurance provider and see if they will insure you for contents and slip/fall while you are in the process of moving out. (If that's in fact why you have stuff left in a house you're not living in anymore). Once you're completely out, there are insurers who will do vacant house policies but it seems to depend on location. I'd just start calling insurance companies for quotes. (Thanks for the kind words.)