Continuing Responsibilities of Homeowners Surrendering Property in Bankruptcy

Continuing Responsibilities of Homeowners Surrendering Property in Bankruptcy

A chapter 7 Statement of Intention or chapter 13 Plan may provide that a debtor’s homestead or other real property will be surrendered. The bankruptcy court may enter an order abandoning the property or granting relief from the automatic stay regarding the property. The bankruptcy court may enter a discharge order and a final decree closing the bankruptcy case. None of those things mean that the debtor automatically stops being the owner.

The debtor does stop being the owner until the sheriff sells the property, the state foreclosure court enters an order confirming the sale, and the sheriff executes and delivers a sheriff’s deed to the buyer. Those things do not always happen right away, and sometimes they take years or even never happen at all. The bankruptcy does not itself accomplish those things.

Continued ownership can have consequences. If the building becomes dilapidated or the grounds become overgrown, the city might fine the debtor. If a mailman, neighbor, vagrant, etc. is injured on the property, the debtor might be sued. If there is a homeowners’ association, the debtor is responsible for all fresh dues that accrue after his bankruptcy is filed, even after he moves out, until he ceases to be the owner.

In view of these considerations, many debtors decide to continue residing in their homes until they cease being the owner, allowing them to continue insurance coverage (or at least liability coverage) and to monitor and maintain the physical condition of the property.

A bonus benefit of that decision is that the rent is free.

Published by

Brian Huckabee

Brian Huckabee is a Tulsa, Oklahoma, attorney with a practice concentrated in bankruptcy and business law. He has handled thousands of business and consumer bankruptcy cases in the past three decades, consisting primarily of chapter 7 and 13 cases, but also including numerous chapter 11 business reorganizations. He represents debtors but has credit union and creditor clients. He has served as an Adjunct Settlement Judge in the United States Bankruptcy Court for the Northern District of Oklahoma. He is licensed in all of Oklahoma’s federal judicial districts, but he concentrates in the Northern and Eastern Districts. He is a member of the Bankruptcy Section of the Tulsa County Bar Association. He received a Bachelor of Arts degree with Honors from Oklahoma State University in 1978 and a Juris Doctorate degree from University of Oklahoma in 1981. He has been married for 33 years to a Tulsa attorney, and he has two grown children, one of whom is a Tulsa attorney. He attends Harvard Avenue Christian Church in Tulsa.