No Judgment. Just Help.

Debtor Can Force Lender to Accept Deed or Foreclose In a Chapter 13 Case

On Behalf of | Oct 19, 2015 | Bankruptcy |

Many condominium owners who file bankruptcy are no longer interested in retaining the property. The law provides that any condo fees that had accrued before the filing of the case will be discharged, however, those that accrue after the filing, are required to be paid as long as the debtor is the owner of the property. Knowing this law, the debtors in the case of In re Stewart, 2015 WL 5138196 (Bankr. D. Minn. 9/1/15), proposed a Chapter 13 plan which provided that upon confirmation of the plan, title to the condo vested in the mortgage lender’s name and the transfer would be in full satiation of its secured claim.

Neither the mortgage lender or its servicer objected to the treatment of its claim in the plan and the plan was confirmed. After confirmation, the debtors filed a motion to compel the lender to transfer title to itself. The court noted that: “While the ‘surrender’ concept embodied in Section 1325(a)(5)(c), and the ‘vesting’ concept embodied in Section 1322(b)(9) are different, they may nonetheless be used in tandem when providing for the treatment of a secured claim in a Chapter 13 plan.” The court went on to state that given the Supreme Court’s decision in Bullard v. Blue Hills Bank, 135 S.Ct. 1686 (2015) , the mortgage servicer, as agent for the lender, is bound by the provisions of the debtor’s confirmed plan. Accordingly, the servicer could either foreclose or accept a quitclaim deed from the debtors.

In Maryland, the Bankruptcy Court has a form order, which does not contain this provision. However, an attorney can add provisions to the standard form, and I recommend using the language from the Stewart case, when a debtor no longer wants to keep a condominium.

If you are considering filing for bankruptcy, or have real estate that you want to abandon, you will need an experienced attorney to evaluate your case. The firm of Laura Margulies & Associates, LLC has successfully handled thousands of cases in Maryland and Washington, D.C., many involving unique or novel issues. Please contact us today for a consultation at 301-816-1600. Our website address is: