Many people say they want to surrender their homes to their lenders when they file for bankruptcy. But saying you intent to surrender doesn’t mean you have surrendered it. As long as the property is titled to them, they own it. Until the deed is changed, it hasn’t changed ownership.
So until it belongs to someone else, there is some risk if someone is hurt on the property after the bankruptcy is filed. As long as the property is in your name, you should keep your homeowner’s insurance to protect you from liability.
It is a good idea to keep up your liability insurance on property you own until after title has passed to a buyer or the bank, even if you plan to surrender or walk away from it in a bankruptcy.
When you file for bankruptcy, you are being released from the legal obligation to pay the debt on the house, but you may be responsible for debts that arise after filing.
Homeowners insurance is usually fairly inexpensive and could protect you if someone is hurt on the property. You should, at the very least, notify your mortgage company, in writing, that they need to insure the property if you allow it to lapse so they can protect themselves.
However the force placed insurance a mortgage company will put on the property will only protect their loan if something happens. It won’t protect the owner from liability or insure any losses.
Latest posts by Susanne Robicsek, North Carolina Bankruptcy Attorney (see all)
- Forget about Bankruptcy - August 29, 2013
- After Chapter 7 Bankruptcy Discharge: Can You Take A 401k Loan? - March 13, 2013
- What Is A No Asset Bankruptcy Case? - February 13, 2013
- Bankruptcy Basics: When is Chapter 7 A Good Option? - January 13, 2013
- Bankruptcy Overlooked By Financial “Experts” - December 19, 2012
Last modified: October 11, 2012