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Here’s a question I frequently get that displays an understandable confusion about what a bankruptcy does and does not do; “If I choose to surrender my home in a Chapter 7, when do I have to move out?”   

Chapter 7 of the Bankruptcy Code provides three options for the treatment of secured creditors, including mortgage companies.  If the debtor chooses to keep property that is collateral for a debt, the secured creditor must be paid.  That can be done by a formal “Reaffirmation”, where the debtor signs an agreement, filed with the court, which excludes the debt from the discharge.  In other words, the debtor still has personal liability to pay the obligation despite the bankruptcy.  There is also an informal process called “Retain and Pay”.  This is not sanctioned by the Code, but is frequently allowed by mortgage companies.  In that instance, the debtor continues to pay the mortgage without an agreement.  The debt is discharged, but the debtor stays in the home as long as payments are made.  This has the advantage of relieving the debtor from a personal obligation to pay.  However, the mortgage company will not report future payments on the debtor’s credit report, thus possibly delaying credit rehabilitation. 

The second option for keeping collateral after bankruptcy is “Redemption”.  Here the debtor pays the creditor the value of the asset in cash and the creditor releases the lien.  This option is often used to pay car loans less than the balance by only paying the value of the vehicle.  Because of the cost, this option is generally not available to pay home loans.

If the debtor chooses to not keep the collateral, including a home, the Code provides that he may “Surrender” the collateral to the creditor.  Here is where the confusion begins. “Surrender” is a term of art.  There is no physical surrender, and the bankruptcy does not transfer ownership of the property to the bank.  Something must be done during or after the bankruptcy to convey the property to the bank.  Bankruptcy discharges the debt, but it does not dispose of the property.

Avoid post-bankruptcy foreclosure:  We can help! Please visit us at

Even if the choice is to surrender the home as part of a Chapter 7, the automatic stay provision of the Bankruptcy Code still protects the debtor, at least temporarily. At some point, the mortgage company may file a motion in bankruptcy court called a Motion for Relief from Stay in which they ask the Judge to lift the automatic stay so that they can pursue their state law remedies, including foreclosure. Once stay relief is granted, the mortgage company can start the foreclosure process. My advice to clients is to sit tight and stay in the house. Once stay relief is granted, the clock will start ticking.  Here in Washington the foreclosure process takes a minimum of six months and, in practice, much longer.   

Finally, if the mortgage company does nothing, the stay will remain in effect until the case is discharged and closed. At that point, the stay would terminate and the mortgage company could start the foreclosure process post-discharge.  But here’s the key point, until the bank forecloses or the property is sold, the debtor still owns it.  Neither the bankruptcy filing, relief from stay nor the discharge removes the debtor from the deed.  So the answer to the question proposed at the beginning of this email is, “You don’t have to move until the bank forecloses or you sell the house.”  

In addition to the question of moving from the home, the confusion that arises from the use of the term “surrender” has two implications.  First is HOA dues.  The bankruptcy discharge applies only to those dues that were due at the time of the filing.  Any HOA dues that become payable after the filing must be paid until the debtor no longer owns the property.   

The second problem is illustrated by a call I received last week from a homeowner who had received a bankruptcy discharge in 2011.  He was denied a home loan because he still owned the property he had “surrendered” in the bankruptcy.  He was under the misapprehension that the bankruptcy had somehow transferred the ownership to the bank.  I assured him that was not the case.  For reasons known only to the mortgage company, no foreclosure had ever been initiated despite the more than three years of no payment. He now had to find a way to dispose of the property.  

Avoid post-bankruptcy foreclosure:  We can help! Please visit us at

I guess that this was all a long way of saying that even bankrupt homeowners may be in need of your services.  Once the bankruptcy is closed, there is an opportunity for you to list and sell the property.  A short sale may be an attractive alternative to foreclosure.  It gives control of the timing to the homeowner.  It may result in less credit impairment, and if there are HOA dues, it will more quickly relieve the homeowner from responsibility for paying them.

(Credit to the author of this article:  Ed McFerran, Attorney at Law)

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Carlo Delizo, Team Lead
Re/Max Metro Realty Inc.

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Carlo, Thank you for helping us finding our dream home. Your professionalism and honesty are greatly appreciated. We look forward to doing more business with you in the future.


~ Annie & Jonathan

I just wanted to thank you for all of your help in finding a home for my family. We've gone through this process for almost nine months and you've stayed patient, positive, consistent and worked hard for us through this whole process. Lynn and I are very thankful that you were able to save us from the many pitfalls we could have fallen into such as the new construction property in a flood zone that the builder didn't even know about, many overpriced homes and homes in general that you didn't think would be a good fit for us. One thing I know for sure is that I won't ever be using another agent for my future real estate purchases because your overall level of service and expertise is above and beyond everyone else in my opinion. CONTINUED...


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~ Andrew & Lynn B.

Carlo has helped myself and my family find the right home for the right price; and had gone above and beyond what was expected of anyone. I got sick during the process and was not able to complete many of the necessary steps in the home buying process. Carlo spent countless hours of his own time helping my family through those rough times and I would recommend him to anyone. He is very thoughtful, friendly and most of all honest. I also consider him my friend. Thank you Carlo,


~ The Lockwood Family

After renting an apartment for 2 years and looking for a house for 1 year, we finally get the right house for us. The whole home buying experience was great because of our very hard working property broker. We got exactly what we are looking for in our 1st home! We are now officially home owners!!! We are so excited and happy. Stay tuned for our house warming soon!


~ Renee Ashley

We are officially home owners!!! Thank you Carlo for helping us get our first home. ...I just knew you would be the one that can help us get a great home. All your hard work and experience is very much appreciated. You made the whole experience enjoyable.


~ Jade A.

Carlo, Thanks for everything! I had more than a satisfactory experience and I would for sure recommend you to anybody that I know in the Seattle area whose either buying or selling. ~ Dante


~ Dante D.

Carlo, Thanks for being an awesome real estate agent! The condo is amazing and look forward to working with you again in the future! I hope that you enjoy this rye as much as I do! It is my favorite!


~ Jonathan M.

Hi Carlo, Thank you so much for all your help and patience with working with us to short sale our home. You have done an awesome job and we will definitely recommend you to any one we know. All the things you have said has happened. Can you come out to dinner with us after this is over to celebrate? Have you been to the Crab Pot in Bellevue? Thanks


~ M. & L.

Hi Carlo, Thats really great news, You are a superhero!... Thank you so much for your hard work and patience.


~ M. Villasin

Carlo, There aren't enough words to express our gratitude! You were very thorough and kept us in the loop through the entire process. We were amazed how on point you were with EVERYTHING, even down to the week we would close on a deal. Everyone we told were amazed about how fast and smooth everything went. Your knowledge and expertise is top notch. You have truly exceeded our expectations. We will recommend you to everyone! Thank you for everything!


~ M. & A. Bauer

No words to say but " THANK YOU! ", will pick the keys soon and leave some thing for you at your office. I am not well lately, so moving slowly. Take a good care of yourself and wish the BEST to your BUSINESS!! God bless your parents.


~ S. Chen

Carlo, Greg and I would like to take this opportunity to properly thank you for representing and even advancing our interest to the best you could. We could not ask for any broker as knowledgeable and as professional as you are. We are forever grateful! If your website has a page for testimonials, we would not hesitate to put in good words for you. Nonetheless, rest assured that we will never hesitate recommending you to any one needing of your expertise.


~ Mr. & Mrs. Pangilinan

Congratulations on your 100% Club award! Thank you for being a part of our team, we are honored to be a part of your success. Keep up the great work!


~ David Milot, Owner of RE/MAX Metro Realty Inc.

Thank you for taking the time to explain everything to me. Thank you so much for all your help. We can finally move on.


~ Mai P.

(via Facebook timeline) Best agent!!! Thank you!!!


~ M. Capiral

(via e-mail) Hi Carlo! ...I really appreciate the patience you have with us all the way through the process. We need to take you to dinner!


~ H. Nguyen

Dear Carlo, Thank you for taking so much time showing me properties and helping me learn. I appreciate your knowledge and professionalism. I am looking forward to working with you again. Sincerely, Joyce Pier (425)486-XXXX


~ Joyce Pier

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