When property is surrendered through bankruptcy, your personal liability for the debt attached to the property is dischargeable. Surrender of the property, however, does not automatically transfer title to the property out of your name. You remain the legal owner of the property until the title is transferred, often through a commissioner’s sale following a foreclosure. Mortgage companies are often slow to foreclose on properties surrendered through bankruptcy, and bankruptcy courts have been resistant to force mortgage holders to foreclose or accept transfers of title. This means that a surrendered property may remain in your name for an extended period of time following bankruptcy. You may remain personally liable for future homeowners’ association dues, fines from the city for failure to maintain the property, and damage claims resulting from an injury or accident occurring on the property. There are ways to protect yourself and manage these responsibilities until the property is transferred out of your name. A deed in lieu of foreclosure is often an efficient way to quickly transfer title to the property to the mortgage holder.
Another interesting method of transferring property out of a bankruptcy filer’s name was recently tested in a Hawaiian bankruptcy court. The Court, In re Rosa, No. 13-00630 (Bky. Hawaii July 8, 2013), approved a provision in the filer’s bankruptcy plan that transferred ownership to the mortgage holder upon confirmation of the plan and recording of the Confirmation Order as a deed of conveyance. The mortgage holder did not object to the plan, and the plan was subsequently confirmed by the Court. While this transfer procedure has not been tested in the majority of bankruptcy courts, it is an interesting potential method that would allow bankruptcy filers to transfer property out of their names simultaneously with their surrender and discharge of liability through bankruptcy.
If you are interested in surrendering property through bankruptcy or simply learning more about your options through bankruptcy, make an appointment to speak with one of the experienced bankruptcy attorneys at O'Bryan Law Offices today. Call us today at 502-400-4020 for a free bankruptcy consultation.