Dear Bankruptcy Adviser,
I filed Chapter 7 bankruptcy, which was discharged earlier this year. I included the house I owned and currently occupy. I included this house in the bankruptcy because the house is at least $20,000 underwater. I was wondering if I can buy the house back at the foreclosure auction if I want to. I have the money to buy it. Would I then be responsible for the taxes that I haven’t paid yet and all the fees for those? Also, should I move out prior to the auction in case I don’t get the winning bid, or do I have some time to move after the auction if I don’t win?
I don’t get this question very often since you definitely are in a very small minority of homeowners who lose their homes but have the funds to buy back the property. On occasion, a client will tell me that his or her family is putting up the money, but rarely does the homeowner have the funds.
In your case, like many others, you decided to let your house go and filed Chapter 7 bankruptcy, which wiped out any mortgage liability. Now, you are in a position to buy back the house, which is scheduled for sale at a foreclosure auction.
I definitely would advise you to consult with someone experienced in purchasing properties at foreclosure sales. While the process is rather straightforward and you can definitely handle this on your own, every county in every state has different procedures. Any information about the procedure in your particular county will be invaluable before you start bidding.
As you know, the highest bid wins. You would attend the auction and bid on the property. At that point, you would have to provide the funds to the individual or company handling the auction. I believe you must show proof of funds before being allowed to bid on the property. Otherwise, anyone can go in and run up the purchase price without having any ability to buy the property.
As the new owner of your old home, you will then have to find out the total delinquent property taxes. Property taxes run with the property and are not wiped out by the bankruptcy. If you were to walk away from the house, you would not be liable for those unpaid property taxes, but you must pay them in order to keep the property.
In some cases, the mortgage lender has already paid past-due property taxes. It is possible that the purchase price of the property incorporated past-due property taxes. The county tax assessor’s office will be able to confirm whether an outstanding balance exists.
In the event you do not save your home, you don’t have to move out that day. The new owner, be it the bank or an individual investor, does not want to waste money evicting you from the property. That can cost a lot of money and take a long time. Usually, you will be given “cash for keys” to move out and leave the place in good shape.
Ask the adviser