Should we file a deed in lieu or wait for foreclosure after bankruptcy?

According to Fair, Isaac & Company, the entity that developed FICO scores, the average points lost in a mortgage foreclosure are as follows: 30 days late: 40 - 110 points 90 days late: 70 - 135 points Foreclosure, short sale or deed-in-lieu: 85 - 160 Bankruptcy: 130 - 240 As you can see, the hit you take on a foreclosure is about the same as a deed in lieu of foreclosure or a short sale.

A deed in lieu or in rem foreclosure are pretty much the same with regard to credit reporting, since the note was discharged in bankruptcy. Your best bet will be the means by which you can transfer the property out of your name and to the bank the soonest.

You can't force a deed on the bank. A deed in lieu of foreclosure isn't something you "file". Your lender has to accept it, which it may or may not be willing to do. Call your lender. As far as property taxes, in California, property taxes are an obligation in rem, meaning they attach to the property; you are not personally responsible for property taxes. Your lender will likely pay the property taxes because delinquent property taxes take priority over consensual liens like mortgages. If you still occupy the property, stay current on the HOA dues. If you no longer occupy the property you may not be liable for the post-petition HOA charges. Speak to an attorney. Online blogs are no substitute for legal advice.

A deed in lieu of foreclosure has to be accepted by the bank. If the bank will not agree to it then you must wait for the foreclosure or try a short sale if you are in a hurry to get rid of the house. They are all equally bad for the credit report, particularly since already filed a bankruptcy case. So keep the house while you can, keep it insured, and live free (except the post-bankruptcy HOA fees which continue to acrue while you are in possession) for a while until the bank takes it away. Taxes are a lien against the property and not a personal debt so you will not have to pay the property taxes.

A deed in lieu of foreclosure will speed the process compared to waiting for a foreclosure. Neither have tax implications because the personal liability has been discharged in the bankruptcy. HOA dues are still owed until the foreclosure or deed in lieu is completed; that is another reason to do a deed in lieu. Finally, there may be a slight advantage, although not necessarily, to having a deed in lieu for credit rating purposes.