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Home > Ask The Get Out of Debt Experts > Filed chapter 13 bankruptcy but mortgage company did not foreclose…house still in my name and is now a public nuisance. – JC

Filed chapter 13 bankruptcy but mortgage company did not foreclose…house still in my name and is now a public nuisance. – JC

Hello! I filed chapter 13 about 3 years ago, in Las Vegas, NV, which is where I have been living for past 9 years.

I owned a home in Toledo, OH during that time as well, which never sold when I moved to Vegas, putting me in further debt to try to pay a mortgage, rent, and credit cards, thus filing for bankruptcy.

Now I’ve come to find out that the mortgage co. never foreclosed on the house when I filed, therefore the house is still in my name, and since no one has lived there for several years, it has become a public nuisance and I am now required by the city to report to court because of it.

I thought bankruptcy would take care of every debt including mortgage, so now I have a criminal case against me because of this house being a nuisance, taxes that are past due on this house, and the bank does not want the house, so still no foreclosure which I was hoping for.

I’ve talked to bankruptcy attorneys, foreclosure attorneys, and criminal attorneys and get different answers every time. I can’t afford to fly back to OH much less fix up the problems with the property and/or demolish it. The banks dont want it, yet its still in my name and still a nuisance….any advice would be GREATLY appreciated.

JC

Filed chapter 13 bankruptcy but mortgage company did not foreclose...house still in my name and is now a public nuisance.   JC
Filed chapter 13 bankruptcy but mortgage company did not foreclose...house still in my name and is now a public nuisance. - JC by

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  • Amie

    We surrendered our home 3 years ago in chapter 7.  The bank still only has us in default.  We are living here & they continue to pay the taxes & insurance.  We were with Country Wide before it went to BOA & are now wondering if we could be one of the many that they can’t foreclose on because they don’t have the note.  How would we go about trying to find this out?  My father inlaw is holding a house for us to rent from him but we don’t want to leave this one until it’s out of our name.  I’ve heard there are a large amt of homeowners the banks can’t foreclose on due to not having original notes & the homeowners can live in their house free forever since it can’t be sold.  Could this be our case even though we surrendered it? I need to find out who can help me with finding this info out because if we can stay we will.

    • http://GetOutOfDebt.org Steve Rhode

      The issue isn’t that they can’t foreclose because they don’t have a note but that many accounts are in such limbo because the banks don’t want to foreclose and take possession and thus responsibility for the property.

      As long as the house lingers in your name you have all the obligation of clearing the lien against the home for the note and no title to the property. You also remain responsible for upkeep and taxes.

      Here is one recent article on this subject http://getoutofdebt.org/43776/the-effect-of-bankruptcy-on-your-mortgage

      Are you making no payments to the bank at all?

      You should contact a licensed real estate attorney in your state. And also talk to your bankruptcy attorney.

      • sunshinesammy2452

        We surrendered it in our Chapter 7 Bankruptcy 3 years ago & have made no payments Our attorney told us we were free to move whenever we wanted & that the mortgage company would resume the payment of taxes since we had surrendered it. We were told that surrendering it in the bankruptcy meant that we were no longer responsible for making any mortgage payments.  The taxes & homeowners insurance were included in our mortgage & they have been paying it.  Our bankruptcy lawyer said we would not have to pay any of that back once it goes to foreclosure.  I hope he knows what he is talking about.  The bank won’t tell me anything that’s why I thought maybe they had lost the note that I’ve been reading has happened with MERS system they were using.  I did ask them what I should do if we move & they said to contact them so they can secure the house & begin taking care of it.  We are tired of being stuck in limbo & don’t really feel safe leaving the property while it’s in our name. 

      • http://GetOutOfDebt.org Steve Rhode

        The kicker is to see if the property taxes with your county are listed in your name or the name of the bank. If the taxes are under the name of your bank then you can most likely walk away and start over.

        Again, I would urge you to talk to a local real estate lawyer.

  • Bonniewells1971

    my boyfriend was laid off in a massive GM shutdown  has just found employment again but 8 days away from losing his home any ideas?

    • Kristin Crone

      Find an attorney to discuss all of the options with you immediately!  You will want to ask the attorney about sale postponment, short sale, bankruptcy, litigation, etc.  Ask the attorney to discuss all possible options.  You’ll need to make a decision and act right away. 

    • http://GetOutOfDebt.org Steve Rhode

      If he can afford the mortgage payment and a bit extra to make up for his late payments he might want to talk to a local bankruptcy attorney about a Chapter 13 bankruptcy to protect the house.

  • Guest

    There is insufficient information in your description of the facts to give a definitive answer.

    One can say that a bankruptcy which lists a home loan as one of the debts, absent a re-assumption of the underlying debt, discharges the debt secured by the mortgage but does not in and of itself alter title to the property or void the mortgage. In sum, until the creditor forecloses the mortgage and any redemption period expires title to the property remains in the debtor subject to the mortgage … unless the debtor formally deeds the property over to the creditor (see below). Also keep in mind that, until the creditor forecloses and any redemption period that may exist expires, the debtor may continue to reside in the home essentially “rent free” … something which can have significant value.
     
    Given the limited facts described the debtor appears to still be the owner of record of the home. Whether the property is a public nuisance cannot be determined from the facts as described. The answer to that question probably depends on the condition of the dwelling and the technicalities of local law. I assume the debtor has vacated the home. Normally one would not assume that simply because a property is vacant it is a public nuisance, however, if it is vacant and dilapidated, deteriorating, or otherwise unsafe that may be another matter. Arguably the owner of record is responsible for maintaining the property in a manner consonant with the legitimate interests of the public.
     
    The debtor may want to consider offering the creditor a deed in lieu of foreclosure. At that point the debtor would no longer be the owner of record and any responsibility for maintenance would cease . Whether the creditor would want it is another matter; given the glut of foreclosed properties on the market the creditor may be in no great hurry to assume title to yet another one.

  • Guest

    I agree with Lewis Roberts.  I am a bankruptcy attorney in NC and we often will have the same problem.  Debtors can’t afford the house and surrender the house in bankruptcy.  The debtor is still the owner of the home until the foreclosure takes place.  Sometimes, the debtor can submit a deed in lieu of foreclosure but the bank will have to take delivery of the deed and record it so this may be of limited utility.

    An informal way that I have dealt with the issue is to write the tax office a letter telling them that the house was surrendered in the plan and the tax office should foreclose (property taxes are generally first priority) ahead of the mortgage.  My tax office generally goes along with this.

    Another problem involves the nuisance such as not maintaining the property.  Informally, we do the same thing as above. 

    But, as evident below, these are not optimal solutions.

    • http://GetOutOfDebt.org Steve Rhode

      Great tip about the tax office.

  • http://northeast-properties.com Andy Faria

    This is a tough spot to be in.. A very good friend of mine is a bankrupcy attorney up here in MA and I bounced this scenario off of him. His first response was, “tell him to rent it out and pocket the money” He was only half serious when he said this… but he kind of has a point. If the bank is unwilling to take the home back, and you’re no longer responsible for the debt, it could be a win-win for all. The city no longer has an eye-sore/liability, and you now have some extra cash. I understand this could be a logistical nightmare with you now in NV, but it may be worth a thought.

    What I was told is that the bank does not have to take the home back until they are ready, even after a BK (in MA anyway). If you’re dead-set on getting this house out of your name (and I wouldn’t blame you one bit if you were) you should probably list the home for sale again. List it on the bottom end of market value and present any offers to purchase directly to the lender. Most likely it will run through their short sale system and you will get your answer. Even if the offer is below what they would normally accept as a short sale, you have a compelling argument…. the home has been vacant for years. Also keep in mind that you may be able to roll any fines, assesments, or liens that have been levied against the property, into the short sale so you don’t pay them out of your own pocket.

    I’m very curious to hear what other BK or Real estate Attny’s have to say about this one. Good Luck! 

    • http://GetOutOfDebt.org Steve Rhode

      Thanks Andy.

      Here is what bankruptcy Lewis Roberts said to a previous reader with a similar situation. 

      “This is a common misconception in bankruptcy…. that surrendering the
      house means you are no longer responsible in any way. The bankruptcy
      discharge only eliminates your personal obligation to pay the debt.

      You
      are still the legal owner of the home until the bank starts and
      finished the foreclosure process. And in Florida, during these times, we
      know that can take forever – years.

      So you are technically still
      liable for the HOA dues that come due post bankruptcy petition filing
      date. Usually though, I see the HOAs sitting back and collecting once
      the foreclosure finishes. But this might start to change if the banks
      take forever to foreclose.

      As to insurance and taxes, you can
      ignore the taxes. But insurance is something else to consider. Since the
      house is still in your name, if someone injures themself on your
      property, you may be sued. And since this is after the bankruptcy, it
      cannot protect you.” – Source

      I’ll reach out to some other attorneys and ask them to comment as well.

      Steve

      • Kristin Crone

        This is exactly correct.  Bankruptcy only discharges the personal liability on the mortgage debt.  It does not require the bank to take title to the property. 

        In California, where I am licensed, the bank is not required to accept title even if you sign it over to them and send it to them.  They have the option of rejecting the assignment of title.  In that case, you’re stuck with the property.  You will be liable for any charges that accrue post-petition (note this is at the time you file the bankruptcy and not the time it is discharged). 

        Sometimes the HOA will foreclose.  If not, you might be stuck with the property.  I see this scenario more than you can imagine.  I once had an attorney theorize that you could try to deed your property over to the county tax assessor in satisfaction of the property tax debt.  I haven’t seen this done yet, but I’m really curious to see if it works.  I would think the county could reject transfer of title just like the bank, but I wonder if they might accept and auction off the property.  If any brave souls want to try this idea out, I’d very much like to know the result.

        It’s funny how half of my clients are trying to keep their homes and the banks are fighting to foreclose and the other have are fighting to get the banks to foreclose.  It seems as if the banks are both too big to fail and too big to handle business properly.

        Good luck to you.

      • http://GetOutOfDebt.org Steve Rhode

        “too big to handle business properly” LOL. So true.

  • http://northeast-properties.com Andy Faria

    This is a tough spot to be in.. A very good friend of mine is a bankrupcy attorney up here in MA and I bounced this scenario off of him. His first response was, “tell him to rent it out and pocket the money” He was only half serious when he said this… but he kind of has a point. If the bank is unwilling to take the home back, and you’re no longer responsible for the debt, it could be a win-win for all. The city no longer has an eye-sore/liability, and you now have some extra cash. I understand this could be a logistical nightmare with you now in NV, but it may be worth a thought.

    What I was told is that the bank does not have to take the home back until they are ready, even after a BK (in MA anyway). If you’re dead-set on getting this house out of your name (and I wouldn’t blame you one bit if you were) you should probably list the home for sale again. List it on the bottom end of market value and present any offers to purchase directly to the lender. Most likely it will run through their short sale system and you will get your answer. Even if the offer is below what they would normally accept as a short sale, you have a compelling argument…. the home has been vacant for years. Also keep in mind that you may be able to roll any fines, assesments, or liens that have been levied against the property, into the short sale so you don’t pay them out of your own pocket.

    I’m very curious to hear what other BK or Real estate Attny’s have to say about this one. Good Luck! 

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