Paying for Property Maintenance During the Bankruptcy Process: Is it Necessary?
One method of preparing for a bright financial future is to invest in real estate. As with any investment, there is always a risk for the investor. In today’s real estate market it seems that there have been many more people taking that risk and feeling the consequences of a downturn in the housing market. Multiple properties requiring simultaneous mortgage payments, maintenance and upkeep costs can lead individuals with otherwise healthy financial lives to consider bankruptcy.
In some cases, the properties that are draining an individual’s savings, income and future income, are already in foreclosure. In this situation, many attempt to sell (or complete a short sale if the value of the home has dropped drastically enough to qualify). In the event that the home doesn’t sell, it quickly becomes apparent that even minimum maintenance and upkeep costs and bills can be a major financial problem.
It’s a common story. Vacant properties that were originally intended to be rental properties or quickly turned over investment purchases can be enough to upend anyone’s finances. No tenants in an income property means no income. Your income property immediately becomes an expense. No quick sale of the property means no way to make mortgage payments that were supposed to be covered. Continued ownership means responsibility for the costs of maintenance of multiple properties. The large number of foreclosures in recent years means even trustee sales are often drastically delayed offering little help to struggling consumers unable to cover the costs of maintenance in the meantime. Power and water bills alone can add up to a significant monthly expense when multiple properties are involved.
Many in this situation very quickly begin to wonder if the bills related to non-primary residence property maintenance and upkeep can be included in the bankruptcy proceedings. If the houses/properties that are proving to be a financial burden are to be included in the bankruptcy, immediately shut off the water and power if there are no tenants on the property. The only exception to this advice would be for those who own property in regions that frequently have problems with freezing pipes. If the pipes freeze and bust as a result of your cancellation of services, it could cause expensive repairs that the lender could try to hold you liable for after the fact (see the discussion of notification of abandonment of the property below).
Any utility bills outstanding that existed prior to filing your bankruptcy case will be eliminated through bankruptcy, but you must make sure to list them in the petition so the utility companies are notified as a part of the bankruptcy process. Any utility bills that accumulated after you filed, cannot be eliminated through the bankruptcy.
The next step is to advise your lender that the house/property has been abandoned. This allows the lender to secure the residence to avoid vandalism, disrepair, and lawn maintenance problems. Failure to advise the lender of abandonment of the property could potentially leave you liable for post-filing issues regarding mismanagement of the property. It has become fairly common practice for individuals to pilfer abandoned homes for copper wiring, windows and other fixtures/materials that they can easily resell. In doing so, they can cause significant property damage.
If you are worried about the process of including multiple properties and their associated costs and maintenance bills in your bankruptcy, contact the Southern California bankruptcy experts at Westgate Law today.