My Chapter 7 Was Four Years Ago

My Chapter 7 Was Four Years Ago. Why Am I Still Getting Calls About the Pool?

During the Great Recession, many people who were unwilling or unable to sell or short sell their homes filed Chapter 7 Bankruptcy to discharge the debt owed to the lender. Most debtors surrendered the house to the bank and moved on with their lives, thinking the bank would take back the house and that was the last they would hear of or deal with the property. However, like Jason in the Friday the 13th movies, the house just won’t die.

Florida is a lien theory state. This means that the property is owned by the homeowner, subject to the bank’s lien. Contrast this with a title theory state, where the bank owns the property until the house is paid off by the borrower. This means that Florida real property is transferred one of two ways: (1) by sale from the property owner; or (2) by repossession, foreclosure, deed-in-lieu, etc.

What about the surrender of property in bankruptcy court? The debtor indicates his intention to surrender property by completing a Chapter 7 Individual Debtor’s Statement of Intention. However, the form is just what is says it is: a statement of the debtor’s intention, and it creates no action based on that intention. Because Florida is a lien theory state and because the Statement of Intention is just that, the surrender of the property in bankruptcy court has no impact on the ownership of the house.

Therefore, most homeowners are shocked to find that after the bankruptcy is completed, they still own the house and are responsible for homeowner association assessments, condominium association assessments, homeowner’s insurance, flood insurance, and property maintenance including code enforcement violations, amongst other obligations.

Pair that with the foreclosure timelines in Florida, and it is no longer surprising to receive calls from clients, one as many as 7 years after their bankruptcy was completed, who receive notices from the local code enforcement office of maintenance violations (green pools, overgrown grass, damaged roof, etc.) or received an exorbitant invoice from their association.

The good news is that there is a solution – a sale or short sale of the house will relieve the owner of these obligations, and with the previous bankruptcy discharge there will be no deficiency owed to the lender, and any 1099-C Forgiveness of Debt Income will also be excluded based on the previous bankruptcy discharge.

– Shawn M. Yesner, Esq.

For more information on Chapter 7 Liquidation, Chapter 13 Reorganization or bankruptcy in general, or to schedule a free initial consultation to discuss your options, please contact our firm at: 727-261-0224 or email me at: shawn@yesnerlaw.com.

Shawn M. Yesner, Esq., is the founder of Yesner Law, P.L., a Tampa-based boutique real estate law firm that helps clients navigate the Bankruptcy laws, providing our clients with a fresh start and relief from debt. We assist clients withChapter 7, Chapter 13, liquidation, reorganization, short sales, loan modifications, foreclosure defense, and debt settlement, for clients in Tampa, Westchase, Carrolwood, St. Petersburg, St. Petersburg Beach, Treasure Island, Medeira Beach, Reddington Beach, Kenneth City, Gulfport, Pinellas Park, Seminole, Clearwater, Clearwater Beach, Oldsmar, Dunedin, Safety Harbor, Palm Harbor, Lutz, Wesley Chapel, New Port Richey, Trinity, Port Richey, and other areas that comprise the greater Tampa Bay area.