Foreclosure Advice: “My Debt Has Been Discharged in Bankruptcy but My Lender Hasn’t Foreclosed? Do I Still Have to Pay HO Insurance, Property Taxes, HOA Fees, Etc.?”
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Are you facing foreclosure? Have you filed bankruptcy and had your debt discharged — including giving up your home? If so, you may be thinking that you’re “debt free,” and that includes dealing with fees associated with your home, eg, homeowners insurance, property taxes, HOA fees, etc.
Hold up though; this may not be the case. And, even experts disagree about what you should do if you find yourself in this situation. Proof? A recent post on Trulia.com, a leading real estate site whose contributors are experts from across the RE spectrum (eg, RE agents, RE attorneys, bankruptcy attorneys, etc.), addresses this question. And, they have very different things to say about it.
Answer to What to Do If Your Debt Has Been Discharged in Bankruptcy but Your Lender Hasn’t Foreclosed on Your Property
A realtor who contacted a few bankruptcy attorneys about what to advise his clients to do if they’ve declared bankruptcy but the bank hasn’t foreclosed received conflicting advice, ie . . .
[One] bankruptcy attorney told me that my client who was recently discharged from the debt through bankruptcy technically didn’t own the property anymore and should drop the insurance and not concern himself with the status of the property anymore. However, I didn’t feel comfortable with this information. [So] I consulted yet another bankruptcy attorney who stated that until the bank forecloses, my clients are still named as legal owner of record and therefore remain responsible for the taxes, insurance, security and condition of the property.
We’re inclined to agree with the second attorney’s advice — strictly from a legal responsibility point of view. The bottom line is, even though you may have given your home up in bankruptcy and think that you are free to move on with your life, it’s not that simple.
One homeowner wrote into this blog stating that her HOA had levied fines — in her name, of course — for not paying HOA fees, even though she’d gone through bankruptcy and thought she had no further interest in the property. But, because she was still the LEGAL OWNER OF RECORD on the property, the fines were levied in her name and if she hadn’t paid them, the HOA threatened to sue her.
And, they had every right to.
Post continued below . . .
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Now, imagine if you’ve gone through bankruptcy and are trying to rebuild your credit and something like this happens. It’s why we believe that homeowners facing foreclosure — even those who’ve gone through bankruptcy — should not leave their home. They should stay put. Unless and until your lender formally forecloses on the property, YOU, the homeowner, are still repsonsible for its maintenance and other fees.
The only thing declaring bankruptcy does is release you from the obligation to pay your homeowners loan back to the bank. It does NOT release you from being the legal OWNER of the property. Only a sale or foreclosure (or short sale or deed-in-lieu of foreclosure) can do this.
Hence, if someone hurts themselves on the property, for example, you can technically be sued for it;
The county can assess maintenance fees for failure to upkeep the property (eg, the lawn is overgrown);
Your HOA can sue for unpaid fees;
It’s extremely important to remember this — and one of the main reasons we advise homeowners to stay put.
Homeowner Fees You Can Probably Get Away with Not Paying If You File Bankruptcy But the Bank Won’t/Hasn’t Foreclosed
Property Taxes: If your home is eventually sold, these will “follow the house,” so to speak. Many times, the lender will pay these — even months after they’re due. You can check via your local county’s site to see if your property taxes are being paid.
Now if you can afford to pay these, you should — especially if you’re not paying the mortgage, and particularly if you hope to eventually save your home. This will be less you’ll have to pay to “catch up” if and when your lender does decide to grant you a home loan modification.
Homeowners Insurance: Just like property taxes, many lenders will step in and pay this. Read more about lender-imposed homeowners insurance.
Homeowner Fees You Should Pay, Even If You File Bankruptcy But the Bank Won’t/Hasn’t Foreclosed
HOA Fees: The reason is, HOAs are usually quicker to move to sue you. And even though these fees “follow the house” as well, if you’re trying to rebuild your credit after bankruptcy, the last thing you need on your credit report is a legal action like a suit. So just buckle down and pay this.
Are you facing foreclosure and have filed for bankruptcy — or are thinking about doing so? Share your experience or ask your question in the comments section below.
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Copyright ©2012 Yuwanda Black for Foreclosure Business News. Article may not be reprinted or reproduced in any manner without the express, written consent of the author. Legal Disclaimer: The information dispensed on this blog is not to be taken as legal advice; it is for general purposes only. Please consult a qualified attorney — in your jurisdiction — before taking any action based on the information listed here.