Quitting claim to a property is a simple administrative procedure that doesn't depend on the amount of outstanding debt you have. It's a questionable strategy for debt management if you have a mortgage, however, because a quitclaim does not release you from the mortgage. You could find yourself obligated to make monthly payments without having legal rights to the property. Furthermore, you can't hand the property back to the mortgage company by filing a quitclaim.
Quitting Claim Vs. Canceling Your Mortgage Obligations
Removing your name from the title of a property and canceling your mortgage obligations are two separate issues. The former is simply a matter of changing the way the deed is recorded, and you fulfill the legal requirements for removing your claim to the property simply by signing and filing a quitclaim form. It is far more difficult to remove your name from a mortgage. Whether you have taken out the mortgage in your name or co-signed with someone else, you are legally bound to make payments on it until you pay it off or have it refinanced.
Quitclaim Vs. Deed in Lieu
If you are considering giving your property back to the mortgage company as a strategy for debt management, you won't be able to do so by filing a quitclaim. The proper procedure is called a Deed in Lieu of Foreclosure, and it requires the consent of the mortgage company. By accepting a Deed in Lieu, the lender agrees to take back the property and remove your name from the title in exchange for forgiving all or part of your mortgage debt. It's usually an option only if the lender knows it can sell the property for more than the mortgage amount.
Filing a Quitclaim
To quit claim to a property, you need to transfer the rights to a grantee, who could be one other person or several people if you are quitting claim to your share of a community property. After obtaining the proper form from the county recorder's office, fill out your name, the amount of compensation you are receiving from the grantee, the legal description of the property and whether the title should vest as sole ownership, joint tenancy or community property. After you sign the form -- the grantee does not need to sign -- record it with the county, paying applicable recording fees and taxes on the compensation you received.
Considerations
Because you incur no further debt by filing a quitclaim, the fact that you have outstanding debts is no impediment to doing it. In fact, quitting claim may be a strategy for paying off your debts if you have significant equity in the property and receive appropriate compensation for it. Quitting claim doesn't get you out of the mortgage, but the grantee who takes over the title may be able to refinance or pay it off. If not, quitting claim is at best a risky proposition, but your debts won't prevent you from doing it if you so choose.
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