Surrendering Your Home in Bankruptcy? What can you take?

           It is not uncommon for bankruptcy debtors at Halcomb Singler, LLP, to ask me about what they can take when leaving their home.  The most common question I receive is whether the debtors can take their appliances when they leave the house so that they can use them in their next house, rental property, etc.

          Recently the Southern District of Indiana bankruptcy court, in Mutual Bank fna Mutual Federal Savings Bank v. Doughty (11-50075) a debtor had a mortgage and had obtained several secured loans from Mutual Federal Savings Bank.  Just prior to filing bankruptcy the debtor contacted the bank and told them that all of the secured property (mostly farming equipment) had been sold and that there was nothing left in the house.  A bank representative confirmed upon later inspection of the house that all of the fixtures,  flooring, floor covering, fixtures, the air conditioning and heating units, toilets, plumbing and cabinets.  The court also found that the debtor had lied under oath about some of his equipment, stating it had been sold when in reality it was found in good working condition at the farm of a close relative.

         Mutual Federal Savings Bank filed an adversary proceeding asking the Court to determine that over $200,000.00 should be deemed non-dischargeable in the Debtor's bankruptcy due to his willful and malicious acts.  The court found that the debt should not be discharged in Doughty's bankruptcy, finding that the Debtor either stripped the real property or failed to protect the real property from being stripped of all of its contents, which amounted to a willful and malicious injury.  This is a gross oversimplification of this case in which the Debtor committed several bad acts, all of which would not be advised in bankruptcy.

         However, for our purposes, what I believe is important from this case is that it is not appropriate to go through a home you are surrendering in bankruptcy and take what you would like, leaving the bank with the shell of a house and whatever you deemed unsuitable.  In addition, a bank may decide it worthwhile to file an adversary proceeding against you in your underlying bankruptcy.  Bankruptcy is an opportunity for a fresh financial start and should not be looked at as an opportunity to poach all of the property in a home on the way out.  In general, it is my opinion that it is best to leave behind any fixtures, appliances, etc., that you would leave with the house if you sold it rather than if you surrendered it through bankruptcy.

        If you have questions regarding whether bankruptcy would be of benefit to you and live in Marion, Hamilton, Boone, Tipton or Madison County, Indiana, I would be happy to meet with you to discuss your situation free of charge.  Just give Halcomb Singler, LLP, a call at 317-575-8222.

Halcomb Singler, LLP, is a debt relief agency.  It helps people file for bankruptcy under the bankruptcy code.  No attorney-client relationship with the firm of Halcomb Singler, LLP, is created through this blog. Also, please note that Erika Singler is an attorney licensed in Indiana and does not seek to practice law in any jurisdiction in which they are not properly authorized to do so.  The information contained in this blog is general in nature and should not be relied upon for the circumstances of any individual(s) or businesses.