Can my mother apply for Chapter 7 bankruptcy or should she let the bank foreclose on the house and walk away if she is 78 years old?

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Can my mother apply for Chapter 7 bankruptcy or should she let the bank foreclose on the house and walk away if she is 78 years old?

My mother has health issues and she needs to live where she will receive assisted living or may move in with me. Due to the housing market, she now owes more on her house than its’ value. I have paid her utilities for the past 2 yrs because her SS covers her house payment, escrow, supplemental insurance premiums and creditor payment on an old credit card only.

Asked on October 25, 2012 under Bankruptcy Law, Illinois

Answers:

Terence Fenelon / Law Offices of Terence Fenelon

Answered 8 years ago | Contributor

Since there is little or no equity in the house, I would first approach the lender with an offer of a deed in lieu of foreclosure.  Such an option is advantagous to both parties.  The lender obtains quick possession of the property withourt the incurrence of thousands of dollars of fees and costs and your mother would receive a foregiveness of any remaining debt, thus relieving her of bankruptcy filing fees and attorneys fees.  Some lenders even offer a cash relocation fee to to expedite the process.


If she were to file bankruptcy, she would probably remain in the residence for a longer period of time but the utilities would still have to be paid and the house maintained.


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