Deed-In-Lieu

• A deed-in-lieu of foreclosure is a means of transferring title from yourself to your mortgage lender without the time and expense involved in foreclosure. In some states, mortgage lenders must go to court to foreclose on a person's property. In others, mortgage lenders must meet a series of notice requirement. A deed-in-lieu allows you and your creditor to bypass these processes. Generally, it involves simply deeding the property to the lender and handing it the keys.
  
  

Bankruptcy

• It's possible to do a deed-in-lieu in bankruptcy. Two common bankruptcy options for consumer debtors are Chapter 7 and Chapter 13. As someone looking to walk away from his property, you may choose Chapter 7. In a Chapter 7, the trustee sells your nonexempt assets and you walk away free of personal liability for nonpriority debts. If you possess nonexempt property you want to keep, you may choose Chapter 13 bankruptcy. A Chapter 13 gives you three to five years to catch up on past due debts and allows you to keep your nonexempt property.
  
  

Estate

• Before you can do a deed-in-lieu, you must get the bankruptcy trustee's permission. Your property, including the real estate you want to transfer, belongs to the bankruptcy estate the moment you file your case. The bankruptcy trustee administers the bankruptcy estate, and looks for nonexempt assets to convert into cash for your creditors. The trustee can make things difficult for you, including having your case dismissed, if you fail to obtain her permission prior to transferring title to your property.
  
  

Warning

• A creditor's decision to accept a deed-in-lieu is discretionary. Moreover, a mortgage lender cannot be forced to foreclose on your home according to your timeline. Accordingly, you should budget for lingering homeowner's association fees, insurance and other expenses associated with remaining your property's title holder.