Because so many people in Las Vegas are underwater in their mortgages, there’s frequent discussion of how to deal with them, e.g. deed in lieu of foreclosure, short-sale, stay-and-pay, refinance, or bankruptcy. Most homeowners want to stay on their properties, so their use of bankruptcy—to say nothing of short-sales and offering the bank the deed—is going to be limited. Aside from discharging underwater secondary mortgages and stripping their liens in chapter 13, for those who file chapter 7 Las Vegas bankruptcy, leaving the house is in the cards. The question that might remain is, should you keep paying homeowner’s insurance if you’re in bankruptcy? The answer is yes for two reasons.
One, the process of surrendering the home to the bank is not a quick one. The discharge merely releases the debtor from paying the mortgage, but that’s not the same thing as the bank executing its rights under the lien and obtaining the title to the property. That comes next, sometimes in a foreclosure proceeding, because the title system is operated by Nevada State law and not federal bankruptcy law. It is only after the title is transferred that the homeowner is not liable for any damage or injuries that occur to the property. Thus, it’s wise to ensure that you keep paying your homeowner’s insurance, even in bankruptcy.
The other reason to continue paying the insurance is more practical: ensuring the continued protection your insurance provides to your personal property. It’s one thing if your house is damaged while you’re in bankruptcy, but it’s another thing entirely if your personal property is lost or destroyed. Often home insurance policies protect against damage or theft of your property, even when it’s not in your home, such as when it’s in a storage facility that gets robbed (which happens more often than it should.
Knowing how to avoid these kinds of pitfalls is a persuasive reason to leave your case with only an experienced bankruptcy lawyer.
For more questions about bankruptcy in Las Vegas, please feel free to contact an experienced Haines & Krieger Las Vegas bankruptcy attorney for a free initial consultation. Call us at 1-702-880-5554 to set up your free consultation.