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I Discharged My Mortgage in Bankruptcy. Can I Really Sell The House Now? – Romy

“Dear Lewis,

I filed chp 13 bankruptcy and had agree to let go of my house. No repayment. All debts were discharged. however, the bank is allowing me to stay in the house because i have continued to pay the mortgage/taxes/etc. However I’ve noticed that none of my payments are being report to the credit bureaus.

My questions: do I still own the house? Can I sell it? Also, if I stop paying the mortgage and let it go into foreclosure will THAT adversely effect me? If so, how?

Romy”

Dear Romy,

Be very careful here. Did you definitely file a chapter 13 or a chapter 7?

In chapter 13, you have to affirmatively “surrender” your home or the debt passes through and is not discharged in chapter 13.

In chapter 7, as long as you did not reaffirm the debt, the mortgage debt is wiped away and the lender cannot chase you other than to foreclose.

Regardless, if the lender has not finished a foreclosure, you are still the legal owner of the home. You can sell it, but you would need to pay off the mortgage.

But back to the original question: can it affect you adversely if you let the house go?

Maybe… I do not have enough information to give you an exact answer. If you used an attorney, you need to ask him or her exactly whether you are liable for the mortgage debt if you decide to stop paying the mortgage.

I Discharged My Mortgage in Bankruptcy. Can I Really Sell The House Now?   Romy My name is Lewis Roberts and I’m an attorney licensed in Florida and Georgia. My practice focus is consumer bankruptcy, real estate issues/closings, and mortgages. I also have Florida real estate broker and mortgage broker licenses. I am a proud member of the National Association of Consumer Bankruptcy Attorneys (NACBA), National Association of Consumer Attorneys (NACA), and a graduate of Max Gardner’s Bankruptcy Boot Camp. I enjoy helping people with decisions that impact their financial well-being.

Legal Disclaimer: This is for educational purposes only. It is not to be relied upon as legal advice. It also does not create an attorney-client relationship. No such relationship is formed with attorney without a written agreement.

If you have a bankruptcy question you’d like to ask just use the online form.

I Discharged My Mortgage in Bankruptcy. Can I Really Sell The House Now? - Romy by

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About Lewis Roberts

Lewis Roberts
Florida Consumer Protection Attorney
  • Steve Rhode

    It’s a point that many are not aware of. Thanks for helping to clarify this.

  • William

    When you have a mortgage, you really have two liabilities -  the lien against the house and personal liability for any deficiency if the house is not worth enough to satisfy the debt (*** see below for possible CA exception.)  Bankruptcy discharges your personal liability but the lien on the house stays and the lender can foreclose to enforce that lien.  The lender cannot, though, pursue you for any deficiency because your personal liability was discharged in bankruptcy. 

    ***Nevada just became a non-recourse state for new non-refinanced mortgages created after October 2009. California, I believe, has been a non-recourse state since seemingly forever, so you may not even have that personal liability on mortgage.  Regardless, purchase money first mortgage liens survive a chapter 7 bankruptcy discharge.

    –William
    (Nevada BK attorney)

  • Woody

    Dear Lewis:

    Your answer to Romy’s question: “I Discharged My Mortgage in Bankruptcy. Can I Really Sell The House Now?” confuses me.  I quote your reply, “In chapter 7, as long as you did not reaffirm the debt, the mortgage debt is wiped away and the lender cannot chase you other than to foreclose.”

    Here is my situation: facing foreclosure and beating its public auction of my house deadline last October 2010, I paid off my default (plus other junk fees such as collection, interest, late and attorney’s fees – yikes, they stink! … anyway to get reimbursement?) and got my mortgage account reinstated to ‘normal’, and have been paying monthly mortgages regularly until now.  In December 2010 things gone worse so I filed for chapter 7 bankruptcy, and received the “Discharge of Debtor” last April 2011 from the Central District of California Court.

    My confusion to your above quote is: since I did NOT reaffirm any debt when filing ch. 7, does it mean the remaining balance of my mortgage debt is truly 100% “wiped away” after my discharge?  If so, then do I still have an obligation to pay my monthly mortgages as usual until my debt is 100% paid off?  I plan to keep staying in my current house, but possibly thinking to sell it in the near future.

    You also state that “the lender cannot chase you [me] other than to foreclose.”  Legally now after my discharge, the house still belongs to me and I own it, right?  If so, what entitles my lender to foreclose my house and on what ground the lender can do the foreclosure in the future?  I guess here having something to do with the regularity of my monthly mortgage payments, but please inform me if there is anything else?  Thank you for your explanation.

  • Woody

    Dear Lewis:

    Your answer to Romy’s question: “I Discharged My Mortgage in Bankruptcy. Can I Really Sell The House Now?” confuses me.  I quote your reply, “In chapter 7, as long as you did not reaffirm the debt, the mortgage debt is wiped away and the lender cannot chase you other than to foreclose.”

    Here is my situation: facing foreclosure and beating its public auction of my house deadline last October 2010, I paid off my default (plus other junk fees such as collection, interest, late and attorney’s fees – yikes, they stink! … anyway to get reimbursement?) and got my mortgage account reinstated to ‘normal’, and have been paying monthly mortgages regularly until now.  In December 2010 things gone worse so I filed for chapter 7 bankruptcy, and received the “Discharge of Debtor” last April 2011 from the Central District of California Court.

    My confusion to your above quote is: since I did NOT reaffirm any debt when filing ch. 7, does it mean the remaining balance of my mortgage debt is truly 100% “wiped away” after my discharge?  If so, then do I still have an obligation to pay my monthly mortgages as usual until my debt is 100% paid off?  I plan to keep staying in my current house, but possibly thinking to sell it in the near future.

    You also state that “the lender cannot chase you [me] other than to foreclose.”  Legally now after my discharge, the house still belongs to me and I own it, right?  If so, what entitles my lender to foreclose my house and on what ground the lender can do the foreclosure in the future?  I guess here having something to do with the regularity of my monthly mortgage payments, but please inform me if there is anything else?  Thank you for your explanation.

    • William

      When you have a mortgage, you really have two liabilities -  the lien against the house and personal liability for any deficiency if the house is not worth enough to satisfy the debt (*** see below for possible CA exception.)  Bankruptcy discharges your personal liability but the lien on the house stays and the lender can foreclose to enforce that lien.  The lender cannot, though, pursue you for any deficiency because your personal liability was discharged in bankruptcy. 

      ***Nevada just became a non-recourse state for new non-refinanced mortgages created after October 2009. California, I believe, has been a non-recourse state since seemingly forever, so you may not even have that personal liability on mortgage.  Regardless, purchase money first mortgage liens survive a chapter 7 bankruptcy discharge.

      –William
      (Nevada BK attorney)

      • http://GetOutOfDebt.org Steve Rhode

        It’s a point that many are not aware of. Thanks for helping to clarify this.

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