What happens to a tax and insurance escrow if a mortgage is not reaffirmed in a bankruptcy?

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What happens to a tax and insurance escrow if a mortgage is not reaffirmed in a bankruptcy?

We have a mortgage with required escrow for taxes and insurance. We filed chapter 7 bankruptcy and did not reaffirm but we’re remaining in the home and continue to make payments. Will the bank continue to make tax and insurance payments from escrow on my behalf? If they do not, what recourse would I have in recovering the escrow funds?

Asked on February 26, 2012 under Real Estate Law, Illinois

Answers:

FreeAdvice Contributing Attorney / FreeAdvice Contributing Attorney

Answered 9 years ago | Contributor

If you filed for Chapter 7 bankruptcy protection and are unable to pay the full obligation under your loan for the home you have such as escrow money for taxes and insurance, your lender can pay this amount and surcharge you the amount in its monthly statements.

Or, the lender could deem the failure by you a breach of the trust deed or mortgage and foreclose on the property after getting leave from the bankruptcy court to do so. I recommend that you consult further with your bankruptcy attorney about your situation.


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