Why is the bank foreclosing on my property if I surrendered it in my bankruptcy?

There are two different obligations when it comes to your property. There is the personal obligation attached to the promissory note and the bank’s claim to the property (collateral for the loan) given to it with a mortgage.

The bankruptcy takes care of your personal obligation to pay, but does not get rid of the bank’s claim to the property (in rem relief). The foreclosure is the bank seeking to take the property back since you are surrendering, or giving it up. The foreclosure clears up title issues and allows the property to go to a foreclosure sale.

There is the option of completing a deed in lieu of foreclosure to give the property back sooner if the bank agrees. This could be helpful if you want to avoid the stress of receiving all the foreclosure paperwork or to transfer title to the bank sooner to avoid post-bankruptcy HOA costs.

Either way, the bank cannot seek a deficiency from you and any 1099 can be cancelled by your tax preparer because your personal obligation to the property is discharged (gone).

Find our more by contacting Miami Bankruptcy Attorneys

Kelly Roberts