Many homeowners facing foreclosure seek relief by filing a Chapter 7 or Chapter 13 bankruptcy. If you decide to ultimately give up your home altogether, you may be eligible for what's known as the cash for keys program offered by many lenders.
Home Foreclosure: What are Cash for Keys Programs?
Cash for keys is known by quite a few names, eg, keys for cash, cash for keys program, cash keys program, cash for keys agreement, cash for keys relocation program. No matter what it's called, it is simply when a lender agrees to pay a homeowner whose home is in foreclosure to vacate the property.
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Why would a lender give a homeowner "cash for keys?" They do it to mitigate costs on several levels, eg, to facilitate helping homeowners move out faster so they can get the property ready for resale/rent quicker; and to ensure that the homeowners doesn't damage the home intentionally, which is a real concern. Proof?
According to the ABC News article, "Here's the Keys, and Some Cement Down the Drains": "About 13.9 percent of all real estate properties owned by a bank or agency were so badly damaged that they did not qualify for standard mortgage financing, according to data collected from real estate agents across the country for November 2010."
So cash for keys programs help lenders and homeowners. But, what many homeowners don't know is that if they file bankruptcy (Chapter 7 or Chapter 13) they may be jeopardizing these payouts, which can run in the several thousands of dollars.
Following is how and why.
If You've Filed Bankruptcy and Want to Accept a Cash for Keys Offer, You May Not Be Able To
There are a couple of reasons you jeopardize any cash for keys settlement when you file bankruptcy, but the main one is that when you file bankruptcy, you not only have to list your debts, you have to list your assets.
And, your assets include any payments coming to you. This includes everything from tax refunds to outstanding paychecks to lottery winnings to, yes, a cash for keys offer.
The reason is, it's an asset - an asset that can be used to pay off your debtors.
Laws vary from state to state, so consult a qualified bankruptcy attorney in your jurisdiction about how not to jeopardize a cash for keys offer that may be extended to you by your lender.
Learn more about cash for keys programs, bankruptcy and foreclosure.
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