Should I Keep Paying My Homeowner’s Insurance After Filing Bankruptcy?

by Susanne Robicsek, North Carolina Bankruptcy Attorney

March 17, 2009

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.

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Concentrating in Consumer Bankruptcy Law since 1988; Wake Forest Law School JD 1987 Law Office of Susanne M. Robicsek since 1993, Law Clerk to Judge Rufus Reynolds, US Bankruptcy Judge for Middle District of NC; Burns Price & Arneke, PA, David Badger and Associates, PA.

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Last modified: October 11, 2012