The Bank is Foreclosing on Your Home? You should be so lucky!

A foreclosure is always a tragedy. Often, however, it is even more tragic when the repo man does not come! How so? Well, let's go through a hypo.

Borrower is going through a bankruptcy because he is hoping to get rid of his debts and start a new life.

Borrower owns a home, he is "underwater" on his mortgage and wants to give up his property and move into an apartment in another city.

So he abandons his house, informs the substitute trustees  that they can have the property and moves out.

The bankruptcy wipes out Borrower's obligations to the mortgage lender, and he can now sleep peacefully at night.

Well, almost.

Here is one REALLY BAD scenario.

The bank decides NOT to foreclose.  The property is just sitting there, abandoned.  And Borrower is still responsible for it!  The post-petition taxes, fines and fees meanwhile accrue, and these NEW debts will follow Borrower around until he files another bankruptcy (in 8 years) or pays up.

And here is how it can get even WORSE.

The municipality discovers that there is something wrong with the property (use your imagination - asbestos, improper or nonexistent licensing/permits, mold, etc.).  Now the bank really does not want it.   Borrower can't abandon it, and he becomes liable for the cleanup (demolition, decontamination, etc.).

Thus, unless you are really certain that the property will be sold, do not file until you figure out what to do with it (once you file, it is usually too late).