Can I Surrender Property Though Bankruptcy?
We have discussed at length the fact that many of our clients are able to keep their property. This other side of this is that many of our clients also choose not to keep their property, or at least certain types of their property. There are any number of reason for electing to not keep property; including that it is in disrepair, the client is upside down in the property, the payments will not be affordable after bankruptcy, or they just want to move on. The reality is that no matter the reason, if you don’t want to keep your property we can help.
We have helped a number of clients facing foreclosure. Some aren’t sure if they need our assistance because they don’t really want to keep the house. However, if your house is foreclosed you may end up owing the creditor money. For example, if you owe $150,000 on your home and the bank only sells it for $75,000 you will owe the bank $75,000. The bank can sue you, garnish wages, and make other collection efforts to try to recover that money. If the bank elects not to go after the money you owe them, and instead writes it off, that $75,000 write off may be taxable income for the year and may end up in a substantial debt to the Internal Revenue Service, which can bring on a plethora of new problems.
Don’t fret just yet! If you don’t want to keep the house it can be surrendered through bankruptcy. In a Chapter 7 bankruptcy you will be able to surrender the house (or other property) to your creditor and you will not owe any amount of money, no matter how much the eventual resale price of the property. Further, the amount of a discharge from bankruptcy is not taxable income, so this will not increase your financial obligation to the Internal Revenue Service or Missouri Department of Revenue.
This all sounds good, right? We agree, however, there are a few things you should be aware of before you get started. If the property you wish to surrender is a vehicle or a car you are still responsible for the property until the bank actually takes possession. There are some situations where the bank refuses to take possession and the house may sit empty for months. We still encourage you to maintain insurance on the property as if anyone was injured on the property you would still be financially responsible. There are some ways around this, but the general rule is that you are responsible while it is in your name.
If you have questions about this, or any other questions, please call your St. Louis Bankruptcy Attorney today! Winter can take quite a toll on your vehicle and you don’t want any unexpected surprises on the side of the road!