What the Word “Surrender” Really Means for Bankruptcy
Many times clients think when they surrender a house or a car in bankruptcy it means that the court takes over and there nothing else for them to do. However, the word surrender in bankruptcy operates quite differently than in ordinary day to day life.
However, once you tell the Court that you are indeed surrendering your assets, this does not relinquish your responsibility for these items. The bankruptcy is discharging your legal liability on the debt, your case will not change the title of ownership or possession of the property, the actual lender must take steps for this to happen.
The creditor does not become the owner until the foreclosure process has been completed. For real estate, this means they must file, notice, and complete a foreclosure auction. In the case of a car, this means that they must follow state law procedures to allow it to repossess and sell the car. What this means is that you are still the owner until this entire process is completed. For example, HOA fees and other property fees are still your responsibility until ownership has transferred.
The best thing to do is to keep the property fully insured until the foreclosure is complete in order to protect yourself. If the property is your current residence you can continue to live there until the foreclosure is complete, the bank would prefer that the property is occupied and maintained until there is a transfer of title. For investment property sometimes you can rent out the property for enough money to cover the HOA fees that may apply and the insurance. This will have you protected and have you avoid any additional bills coming in that may make filing for bankruptcy more difficult.