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Surrendering a Home During Chapter 13 Bankruptcy


Many people going through bankruptcy want to know: what will happen to my home? Unfortunately, the answer to that question is not black-and-white. Rather, it depends on your individual circumstances.

One option that you may consider while going through Chapter 13 bankruptcy is surrendering your home or other real estate. A Chapter 13 surrender may be the best option for people who do not want to waste time or costs and whose homes are underwater.

You can choose to surrender your property at any time during a Chapter 13 bankruptcy. However, most people choose to surrender their homes at the beginning, through the Chapter 13 plan. Debtors may also choose to surrender their homes anytime before the confirmed Chapter 13 plan is complete - they do this through an amended plan.

Why Would You Choose to Surrender Your Home?

A Chapter 13 surrender can be a good alternative to home foreclosure. By surrendering your home, you also surrender all interest in it to your mortgage company.

Once you surrender your home, your mortgage company will still initiate foreclosure proceedings to sell the property. However, any loan amount not covered by the foreclosure sale (the "deficiency") will be discharged.

While surrendering a home does not satisfy all claims (and all mortgages), it will satisfy your secured claims on the home. Furthermore, if there are additional mortgages on your home and those mortgages are fully unsecured (100 percent underwater), you can strip those mortgages through Chapter 13 lien stripping.

Chapter 13 surrender is a complicated subject. To learn more, speak with an experienced Chicago bankruptcy lawyer.