Many people decide to give up their homes when they file bankruptcy, and some are under the impression that the court somehow takes possession of their home. What really happens when you surrender your home in bankruptcy?
The decision to give up your home through the bankruptcy process means that you are no longer intending to make payments on the property, and that you are willing to let the lender take the property back. Your bankruptcy discharge will protect you from the lender coming back to you for any possible shortfall or deficiency on the loan, and you will not have to worry about a tax liability for any cancellation of debt. Your Order of Discharge will protect you from those possible issues.
Do you have to move immediately after you file for bankruptcy? Do they give you time to move or will your possessions be thrown out on the front lawn for the neighbors to view?
When you surrender a home through bankruptcy, there will be a specific process for the lender to obtain the home. The process will vary depending upon whether you live in a judicial foreclosure state or a non-judicial foreclosure state. Florida happens to be a judicial foreclosure state which means the lender will have to file a foreclosure lawsuit in the state court and go through the judicial process to take back possession of your home. This process can typically last the better part of a year, or in some cases even longer. In non-judicial foreclosure states, the lender can foreclose by publication. By publishing notice in a newspaper for four weeks that your home will be sold on the courthouse steps is a much quicker process for the lender to take back your property. Foreclosure is basically the state court remedy to clear the title of the property.
When you file for bankruptcy, perhaps your house is already in foreclosure. The filing of the bankruptcy will temporarily stop the process until the lender gets permission from the court to lift the automatic stay that was imposed upon the filing of your case. If you happen to be in a Chapter 7 bankruptcy, the lender will not be able to proceed until after the appointed trustee determines whether or not your property is of any consequential value to the bankruptcy estate. If you are in a Chapter 13 case, the process may vary depending upon where you are in your case and upon local practice. It is best to ask your attorney about that process.
So, the short answer to, “What happens if I give up my house and file bankruptcy” is : you will not have to move out right away, and if you stay on top of what is going on in your case, you will have plenty of time to make arrangements to move.