I  am not a lawyer.  This post is not in any way, shape or form legal advice. Do not even attempt to use it as legal advice.   It's simply not.  It's a post intended to share information that I have discovered quite recently regarding bankruptcy and how this does not make your home "not your problem."  If you are in this situation I suggest you consult COMPETENT legal counsel.  Most bankruptcy attorneys do not understand foreclosure law.  Most foreclosure attorneys do not understand bankruptcy law.  Be sure you are talking to someone who specializes in the particular topic area.

Working with Jacksonville short sales as much as we do we have run across this misrepresentation quite often.

We always have an escape clause for our short sale sellers.  If you have your home listed for sale with us and have gotten a loan modification or have decided to file for bankruptcy instead, we have always let our sellers out without any penalty.  We truly want what is best for homeowners in trouble out there.  If a  Jacksonville short sale is what is best for your situation, we are happy to help you...if it's not, then we truly wish you the best.

We have let several sellers out of  listing agreements over the past few years because they were filing bankruptcy and their bankruptcy attorney told them they "might as well quit trying to short sale" because they were filing bankruptcy.  The bankruptcy attorney had explained to them that the house simply did not matter to them anymore because once they filed for bankruptcy  the home would become the bank's problem.

We have even seen a bankruptcy attorney talk a seller out of going to closing on a Jacksonville short sale with full approval at the last minute because he convinced her that she would be better off forgoing the short sale and filing bankruptcy instead.

THE ACT OF FILING FOR BANKRUPTCY DOES NOT TRANSFER LEGAL TITLE OUT OF YOUR NAME.

Some other event besides the bankruptcy itself has to occur before legal title to your home will be transferred to the bank.  Even if you file Chapter 7 and you included the home choosing to "surrender" the home in your bankruptcy, did you know the house still belongs to you after the bankruptcy discharge? The act of filing bankruptcy can eliminate the debt owed on the note.  That is it.  Your Florida home purchase also had a second component in addition to the note...the mortgage.  The mortgage is the instrument that secured the debt and allows the bank to foreclose.  The bankruptcy does not wipe out the mortgage, nor does a transfer from the borrower to the bank magically occur.  This has to be done as part of a separate action.

Until legal title transfers to the bank you still own the property even if you have had your debts discharged in a bankruptcy.  

  • Had your HOA dues discharged and think you are off the hook? We have been told by a bankruptcy attorney that we recently spoke to about this issue that you are responsible for all HOA dues after the date of filing.
  • Have dead grass? If they HOA decides to fine you, you will owe this.
  • Weeds in the yard? HOA fines assessed to you after the date of filing as long as the legal title still bears your name are yours.  It doesn't matter if you were discharged and had agreed as a part of the bankruptcy filing to surrender your home.

Does this mean that you are liable for the $9,000 insurance policy they put on your home too?  Does this mean that if someone is walking across your yard and has a horrible accident that you are financially liable?  Does this mean that the bank can come after you to reimburse them for the taxes that they have paid on the property that were accrued AFTER the date of filing?  Is there any limit on your liability?

Are the Banks in a Hurry To Take Possession of Your Home?

You know in Florida we've started seeing the banks drag their feet on actually taking the home back even after obtaining a judgment of foreclosure.  Many times they will get the foreclosure judgment then fail to take the home back.  They do not want it back on their books.  They do not want to be liable for all of the expenses of the home.  The banks are usually in no hurry to take back a home these days.  What if you still have legal title to your Jacksonville home 6 months after your bankruptcy filing?  What if you still have it 8 months after?  What if you still have it a year after?  Two years?  What kind of financial damage will you incur?

Unless you somehow sign the deed over, the bank will have to continue and complete the foreclosure process to get back title to your home.

Think that by filing bankruptcy you are avoiding having a foreclosure on your credit report? 

Think again.  Foreclosures will prevent you from buying again for years longer  than a bankruptcy or a short sale.  Many people think that by filing the bankruptcy they avoid the foreclosure on their credit report.  However, details are now emerging from people who have been through it that are learning that this is not the case.  The foreclosure still seems to be showing up on your credit report.

Current Fannie underwriting guidelines regarding the waiting periods before you can buy again:

  • Bankruptcy- 2-4 years depending on circumstances (4 unless extenuating circumstances, then 2)
  • Foreclosure(non-extenuating circumstances) 5-7 years FROM COMPLETION DATE (!!!) OF THE FORECLOSURE (NOT THE BANKRUPTCY)  depending on downpayment, credit score and occupancy.
  • Foreclosure(extenuating circumstances) 3-7 years FROM COMPLETION DATE (!!!) depending on downpayment, credit score and occupancy.
  • Short Sale / Preforeclosure Sale/ Deed-in-lieu (extenuating circumstances) -Just updated by Fannie 5/10!!! 2 years with 10% down.
  • Short Sale / Preforeclosure Sale/ Deed-in-lieu (non-extenuating circumstances) - Just updated by Fannie 5/10!!! 2 years with 20% down.

Please educate yourself before you let a bankruptcy attorney tell you all of your problems will be over if you just file.  If a bankruptcy attorney tells you that it is a bad idea for you to try to complete a Jacksonville short sale, please get a second option.  Please evaluate your options to transfer title back to the bank in less harmful ways than through a foreclosure.  Please protect yourself!

If you are interested in talking to us about a Jacksonville short sale, let us know.  We can give you a good, honest evaluation and even refer you to a Jacksonville short sale attorney and a foreclosure defense attorney as well to get legal advice.  Our Jacksonville short sale consultation request can be found here.  If we can not help you, we'll tell you that and try to point you in the direction of someone who can.