Is it advisable to have a deed in lieu after a chapter 7 bankruptcy discharge? 17 Answers as of October 18, 2011

We have a condo that was part of a Chapter 7 discharge, the bank still has not foreclosed after 20 months. The bank says they will consider a Deed In Lieu. Is a Deed In Lieu advisable after a Chapter 7 Bankruptcy discharge? Is there any danger of reaffirming the discharged debt in the Deed In Lieu process?

Ask a Local Attorney. 100% Anonymous. Free Answers.

Free Case Evaluation by a Local Lawyer: Click here
Bird & VanDyke, Inc.
Bird & VanDyke, Inc. | David VanDyke
A deed in lieu is a good way to get the property off your back without having to go through the foreclosure process. It will not create any additional liability. It is simply a deed giving the property back to the lender.
Answer Applies to: California
Replied: 10/18/2011
Heupel Law
Heupel Law | Kevin Heupel
I like a deed in lieu after a Chapter 7 as it avoids a public foreclosure on your credit report and helps to rebuild your credit.
Answer Applies to: Colorado
Replied: 10/18/2011
Dan Wilson Bankruptcy
Dan Wilson Bankruptcy | Dan Wilson
Deed in lieu might be a good solution if the bank agrees to take deed in full satisfaction of debt. You should consider having a lawyer help you to make sure.
Answer Applies to: Colorado
Replied: 10/18/2011
The Schreiber Law Firm
The Schreiber Law Firm | Jeffrey D. Schreiber
A Deed in Lieu of Foreclosure transfers ownership to the bank without having to go through foreclosure. It is not a reaffirmation. However, if you have past due HOA fees which are a lien, the bank likely will not take a Deed in Lieu as it does not get rid of the HOA lien which a foreclosure would do.
Answer Applies to: California
Replied: 10/18/2011
Bankruptcy Law office of Bill Rubendall
Bankruptcy Law office of Bill Rubendall | William M. Rubendall
There is no problem giving a deed in lieu of foreclosure after a bankruptcy discharge to get off title. This does not operate as a reaffirmation of the debt that has been discharged.
Answer Applies to: California
Replied: 10/17/2011
    Law Office of Harry L Styron
    Law Office of Harry L Styron | Harry L Styron
    One would have to review the documentationn carefully to be sure, but there shouldn't be any risk of reaffirming in giving a deed in lieu.
    Answer Applies to: California
    Replied: 10/17/2011
    The Law Office of Darren Aronow, PC
    The Law Office of Darren Aronow, PC | Darren Aronow
    You should have an attorney review the Deed in Lieu documents, but you would have already been discharged of any pre petition debt when you received your discharge and should not be reaffirming any debt.
    Answer Applies to: New York
    Replied: 10/17/2011
    Law Office of J. Thomas Black, P.C.
    Law Office of J. Thomas Black, P.C. | J. Thomas Black
    Yes, if the bank would consider a Deed in Lieu of foreclosure, and you don't want the property any longer, that would be a great idea. You want to get the property out of your name so that you are no longer liable for ad valorem taxes and/or Property Owner's Association fees. In fact, so long as you have any ownership interest in the property at all, you remain liable for the Homeowner's Association fees. Section 523(a)(16) of the Bankruptcy Code provides that a debt is NOT discharged if it is for: "a fee or assessment that becomes due and payable after the order for relief to a membership association with respect to the debtor's interest in a unit that has condominium ownership, in a share of a cooperative corporation, or a lot in a homeowners association, for as long as the debt-or or the trustee has a legal, equitable, or possessory ownership interest in such unit, such corporation, or such lot, but nothing in this paragraph shall except from discharge the debt of a debtor for a membership association fee or assessment for a period arising before entry of the order for relief in a pending or subsequent bankruptcy case." (emphasis added). So it is very important to get the condo out of your name, as soon as possible after the bankruptcy is filed. Also, doing a Deed in Lieu with the bank does NOT create a Reaffirmation Agreement, where you would become liable on the debt again. Under Section 524 of the Bankruptcy Code, a Reaffirmation Agreement must meet several very specific requirements, and be approved by either your attorney or the judge, and be entered into before your discharge and filed with the Bankruptcy Court, to be valid. Since your case is already discharged, if you have not already signed a Reaffirmation Agreement with the bank, it is too late to enter into a Reaffirmation Agreement, even if you wanted to, which you don't. A later-signed Deed in Lieu agreement would not revive your liability for the debt, or constitute a valid Reaffirmation Agreement under the Bankruptcy Code.
    Answer Applies to: Texas
    Replied: 10/17/2011
    D T Pham Associates, PLLC
    D T Pham Associates, PLLC | Duncan T Pham
    Deed in lieu is suitable manner to resolve property issue - just make sure that there will be no deficiency judgment afterward.
    Answer Applies to: Texas
    Replied: 10/17/2011
    Janet A. Lawson Bankruptcy Attorney
    Janet A. Lawson Bankruptcy Attorney | Janet Lawson
    If the bank will take it you should do it if you have moved. Check paper work carefully. Remember you owe HOA fees post petition. If you are living there, why don't you stay until bank forecloses? No need to pay rent if you don't have to.
    Answer Applies to: California
    Replied: 10/17/2011
    AyerHoffman, LLP
    AyerHoffman, LLP | Melissa Hoffman
    When you received your bankruptcy discharge, all liabilities that existed prior to filing were wiped out. Unless you signed a reaffirmation agreement during the bankruptcy, there is no way for you to ever be held liable for debts stemming from the condo that were incurred before the filing date. A deed in lieu simply speeds up the process of the lender re-claiming its ownership interest in the property. As a result, the lender has no ability whatsoever to hold you liable for the original debt. Though you are responsible for any debts incurred post-filing, a deed in lieu does not create a new contractual relationship that could ever lead to new debt.
    Answer Applies to: Massachusetts
    Replied: 10/17/2011
    Benson Law Firm
    Benson Law Firm | David Benson
    Whatever you do, do NOT sign a reaffirmation agreement without consulting a lawyer.
    Answer Applies to: Ohio
    Replied: 10/17/2011
    The Merna Law Group, PC
    The Merna Law Group, PC | John G. Merna
    Transferring the property via a deed in lieu of foreclosure does not mean you reaffirm on the debt. There is not chance that you could obligate yourself again through the deed in lieu process.
    Answer Applies to: Virginia
    Replied: 10/17/2011
    Carballo Law Offices
    Carballo Law Offices | Tony E. Carballo
    You need to talk to a lawyer as it sounds like you are very confused about what it means to give a deed in lieu of foreclosure and what reaffirmation of a debt means. Essentially, the deed transfers the title to the property to the bank. A reaffirmation is an agreement to renew the debt. You cannot reaffirm a debt after the discharge and real estate loans do not need to be reaffirmed in this area. Giving the deed in lieu of foreclosure may be a good idea if the bank will accept it although they impose many conditions before they will accept it. You are probably still liable and will continue to be liable for the homeowners' association dues so long as you own the condo even if you filed for bankruptcy. This may be your biggest problem so go see an attorney about the problem.
    Answer Applies to: California
    Replied: 10/17/2011
    Canty Law Firm
    Canty Law Firm | Timothy Canty
    If you live in the condo you can stay there until the bank forecloses, though you may be still be liable for HOA dues. Or you could rent it out for the amount of the HOA dues. Lenders tell me that a deed in lieu looks about the same as a foreclosure on your credit, so I don't see an advantage there. You can't re-affirm a debt after your bankruptcy discharge enters, but I would be careful - you could incur a new debt if you sign anything other than a quitclaim deed. Best to have your attorney review all the facts and paperwork before signing anything. Hope this helps.
    Answer Applies to: Colorado
    Replied: 10/17/2011
    Colorado Legal Solutions
    Colorado Legal Solutions | Stephen Harkess
    A deed in lieu will not result in reaffirming the debt and it is a good idea if the bank will do it so that you can get off the hook for expenses related to the property.
    Answer Applies to: Colorado
    Replied: 10/17/2011
Click to View More Answers:
12 3 Free Legal QuestionsConnect with a local attorney