Forcing A Lender to Take Title to Real Estate in Chapter 13

Does Surrendering the Property End the Ownership of the Property?

An experienced Maryland bankruptcy attorney can help you force a lender to take title to unwanted real estate. One serious problem some clients encounter is how to get real estate out of their name when they do not want it.  Most clients think once they file a Chapter 7 bankruptcy and express their intention to surrender their real estate that ends their ownership in the house and they are free from the obligations of home ownership. Chapter 13  bankruptcy can provide a better alternative.
There is no question the clients obligations on the mortgage will be discharged (though the mortgage will not be removed from the property) and once the mortgage company forecloses they will not owe the mortgage company a balance. What happens if the mortgage company does not want to foreclose and lets the property sit idle in the clients name for years?

Rent Free Option

Not everyone sees this as a problem. Many clients simply stay in the house until the foreclosure sale is imminent and live “rent free” for months or years. Others who are more enterprising might decide to rent the property out on a month to month basis until foreclosure and use the income to take care of upkeep and as extra income without paying the mortgage. Not everyone is happy with this. For the client who just wants all the mess to be over with and wants to be completely free, or who does not want to live in the house or rent it these options do not work.

Obligations for Real Estate Owners

Why should the client care? Real estate ownership carries with it multiple obligations. City water bills, taxes, city and county regulations regarding upkeep, keeping the lawn mowed, clearing trash and debris and possibly boarding the property up. What if unwanted squatters move in and use the home as a drug haven.

Then there are the HOA fees and condo fees. Those pesky HOA and condo fee obligations only are discharged up to the date of the bankruptcy filing. Post bankruptcy fees become due immediately each month until the property is not titled in the client’s name.

Condo Fees

The Bankruptcy Code allows to Court to “provide for the vesting of property of the estate, on confirmation of the plan or at a later time, in the debtor or in any other entity;” 11 U.S.C. § 1122(b)(9). Until recently the bankruptcy courts in Maryland had not had to deal with the issue. We were able to free a client from burdensome condo fees of more than $700.00 per month by providing in the plan that the confirmation of the Chapter 13 plan would fully transfer title to the mortgage company once the plan was approved. The Chapter 13 plan was approved after a hearing.

Other Alternatives

There are other alternatives to this novel procedure. A sale of the property “free and clear” of the mortgage companies interest if the client is no longer living at the property to a buyer who offers less than the amount of the mortgage can also be used to force a change of title.

This option however requires that a buyer be found at some price and often properties that lenders refuse to foreclose are not desirable at any price.

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