A question that has come up a few times recently is a variation of "how do I surrender my house in bankruptcy?" When someone files bankruptcy, she can surrender any property that secures a debt. To "surrender" means to turn the property over to the secured creditor and walk away, receiving a discharge for whatever is owed above the value of the property surrendered. This often happens when the debtor owes more on the loan that the property is worth (a condition known as being "under water"). With personal property, such as cars, boats, home furnishings, electronics, etc., surrender is usually a matter of giving the items to the bank.
A house or any real estate is more difficult. You can't just drop it off at the bank. Even sending the bank the keys to the house isn't good enough because title to the real estate is still in your name in the county recorder's office. If you're still the owner, you could be liable if someone slips and falls on the property. You will be liable for unpaid property taxes and assessments, and you could be fined for not maintaining the property, such as by shoveling the snow in winter or mowing the lawn in the summer.
Some people have tried signing a quitclaim deed and recording it. That might work, but there is a concept in real estate law that requires a deed to be accepted to be valid. Acceptance means the grantee (the bank in this case) willingly takes the deed. Simply recording the deed may not be valid acceptance.
As banks become overwhelmed with properties that are under water, many of them simply don't know what to do. As a result, they might not start and complete foreclosure in a timely manner. This leaves the surrendering borrower in limbo. She has said she doesn't want the property, but she can't get rid of it. The only solution might be to file a motion with the bankruptcy court to force the creditor to accept a deed, thereby getting it out of the debtor's name. The worst thing to do is ignore the situation.
