The answer is typically no. Over the past year I have received various questions about this subject. People, especially those who surrender a house in connection with a bankruptcy filing, often look forward to a foreclosure date. This is because until foreclosure, the homeowner continues to be the owner of the property, unless the agreement between the individual and the real estate creditor says otherwise. Thus, although an individual files a bankruptcy and indicates her intent to surrender her home to the creditor(s), she is still the owner of the home until foreclosure, and will continue to be responsible for paying whatever real estate taxes, homeowners’ association fees and municipal fines accrue after the filing of the case. The owner may also be personally liable for the value of the property if it uninsured and there is property damage.
Under the Bankruptcy Code, the surrender of collateral requires the mutual agreement between the parties involved, and occurs as a result of the consent of both parties. Surrender of property to a secured creditor does not compel the creditor to accept the title to the surrendered property, even when the surrender is pursuant to Bankruptcy filing. Also, courts have rejected the idea that a debtor can compel or force a creditor to foreclose on surrendered property, unless the creditor has already consented to a title transfer.
I commonly recommend that bankruptcy clients continue living in a surrendered house until they are notified of a foreclosure sale date. This allows them to live “rent free” for a time, and also keeps the property occupied. Occupation tends to greatly reduce the chance of municipal fines, vandalism and damage due to extreme temperatures. Sometimes a deed-in-lieu of foreclosure arrangement can be reached with the creditor that refuses to foreclose. This often works to transfer title and relieve the debtor of the burdens of ownership.
