Chapter 7 Debtor Did Not Reaffirm Mortgage

I have a concern about my house. I included my house in my bankruptcy. Bankruptcy has been discharged. I told my lawyers that I wanted to keep it. However, I didn't reaffirm yet. My concern is lets say I loose my job or an unexpected life crisis happens and I'm not able to make payments anymore. Can the mortgage company start the proceedings of a foreclosure if i get too far behind? I was told that the Chapter 7 would protect me from a foreclosure and i was advised not to reaffirm just in case something happens and I have to give the house back to the mortgage company. HELP

Posts: 1
Credits: 128

Sub: #1 Can reaffirm only while chapter 7 open
Fri, 11/09/2012 - 15:42

To clarify -- reaffirmation can happen only within your chapter 7 and has to be approved by the bankruptcy court.

Once you are discharged and closed, it's too late to reaffirm without reopening the case to do it. Probably the judge would refuse.

Posts: 3
Credits: 150

Sub: #2 Chapter 7 holds off foreclosure while you are waiting for discha
Tue, 09/18/2012 - 08:41

Chapter 7 holds off foreclosure while you are waiting for discharge. However, once your bk is discharged you can be foreclosed on. Postbankruptcy, you can reaffirm your mortgage or let the bank take it.

Debt Samaritan
Posts: 163
Credits: 7520.55

Sub: #3 Quote: Des, there is nothing to "refinance" since I personally d
Mon, 09/03/2012 - 18:55

Des, there is nothing to "refinance" since I personally don't have a loan anymore with reaffirmation.

Sorry, but that is "garbage". You have a fundamental misunderstanding of what a discharge is. You still owe every dime of that loan. A discharge is simply an injunction against collection. The loan did not go away. What went away was the lender???s ability to collect - or, rather, you have an "affirmative defense" to any effort to collect.

Further, if the failure to reaffirm a mortgage was really an impediment to securing a loan to refinance no one would be refinancing anything, anytime. Most attnys will not "allow" their clients to reaffirm mortgages.
I am blaming the attorney for not even telling me about reaffirmation agreements. . . Don't you agree that it was a duty of a BK attorney to explain this?

I agree that the attny should have explained to you the difference between retaining (stay and pay) and reaffirming. I can tell you that I discuss this with every client. I also tell my clients that there is no way on this planet I will sign off on a reaffirmation agreement (and neither should they) when there simply is no reason to do so and no clear benefit to the client.

In the nearly 25 years of doing this I have never, ever had a client reaffirm a mortgage and, while a few clients have had questions about this, I have never, ever had a client complain that the failure to reaffirm caused some problem down the road.

If you have sufficient equity and sufficient income, once that "waiting period" passes you should be fine. If some lender tells you that you needed to reaffirm, the lender is just using it as an excuse because it simply does not want to loan to you. If that happens you just need to shop the market.



Sub: #4 The mortgage is 54K, the value is 120K. I am not blaming the at
Mon, 09/03/2012 - 18:23

The mortgage is 54K, the value is 120K.

I am not blaming the attorney for the bad market, I am blaming the attorney for not even telling me about reaffirmation agreements. I did not even know they existed until yesterday. Don't you agree that it was a duty of a BK attorney to explain this?


Sub: #5 Des, there is nothing to "refinance" since I personally don't ha
Mon, 09/03/2012 - 18:21

Des, there is nothing to "refinance" since I personally don't have a loan anymore with reaffirmation.

I have a sufficient income and credit rating... I do need to wait a few more months for the two year waiting period, but I have been told that even after that, I can't refinance something that I don't have financed in the first placed. It is discharged.

Debt Samaritan
Posts: 163
Credits: 7520.55

Sub: #6 Quote: I can't refinance a debt of mine and his when it is no lo
Mon, 09/03/2012 - 18:17

I can't refinance a debt of mine and his when it is no longer mine.

What are you talking about? Refinancing has nothing to do with reaffirming. There is nothing stopping someone from refinancing a mortgage just because that someone did not sign a reaffirmation agreement.

Refinancing requires you to obtain a new loan that pays off the old one and has nothing whatsoever to do with your bk (other than the bk being on your credit report). If you are unable to find a lender willing to refinance the reasons are more like. . .

1. You do not have sufficient income to qualify,
2. Your credit score is too low and you need to concentrate on rebuilding credit before applying for a loan,
3. There simply is not enough equity (typically 70% loan to value) for a lender to agree to take on such a loan. I know you said there was equity but the question is, how much?

Getting a loan today is not so simple. Don't blame the attny for your inability to get a lender's underwriter to approve financing. The blame is most likely to be placed on the fact that such is the way it is after the big boom and bust.



Sub: #7 Never told about reaffirmation agreement
Mon, 09/03/2012 - 16:30

I have read the answers here about how reaffirming is not in your best interest etc, but each situation is different.

I was never told by my attorney that Reaffirmation Agreements even exist, I thought that by indicating on my petition my intention to reaffirm that was all I needed to do. The mortgage was in the name of my ex and me, now he is the only one on the hook, and that is contrary to our divorce settlement in which I was to refinance to get him off the mortgage. I can't refinance a debt of mine and his when it is no longer mine.

I don't know if the bank (BoA) ever sent my attorney a reaffirmation agreement or not, but now I need to have one in place to get considered for refinancing.

But... didn't my attorney have a duty to explain to me about this? He was aware of my situation with my ex. Shouldn't he be responsible for the filing fee and preparing any motion since I would have made sure this was done had I been properly advised?

(the mortgage is way less than the property is worth)

As it stands now, I might have to just sell in order to get his name off the debt, and I didn't want to sell.


Sub: #8 DO NOT REAFFIRM your mortgages
Sat, 08/18/2012 - 01:50

Reaffirmation of a mortgage requires you to be legally bound to the terms of your original mortgage agreement, which includes on time, monthly payments, for the term of the loan. By reaffirming, and if for some reason, you make just ONE late payment or miss a payment, the lender can foreclose on you or sue you, and depending on the circumstances, this CAN affect your credit report in a very bad way, much like the mortgage "included in bankruptcy" already did (on your report for 10 years if Ch 7, payments not being reported, credit score remains low).

BK judges rarely ever grant a reaffirmation because they in fact, know much more about protecting you than you know about protecting yourself. Only in rare, special and unique circumstances should one ever consider reaffirmation.

The problem is most bankruptcy attorneys FAIL to educate their clients about reaffirmation and the effect on your credit reports/scores, and what happens if you default, etc. The same applies to NOT reaffirming, the attorneys FAIL to inform their client that if they choose to walk away, there may still be a foreclosure, plus a huge derogatory on your credit report. You're also still responsible for insurance, taxes etc to some extent and term depending on the foreclosure details/lender etc.

Failure on the attorneys' part to inform their clients is a major problem, and this is why you see thousands of people so surprised to see their payments are not being reported, that they have lost ALL prior payment history before BK, and that it truly hurts your credit score and ability to obtain other credit until you know how to repair and improve your credit. This can take years for people who don't know what to do after a BK.

The big picture is it is a lose-lose situation, but there's a certain amount of hope for those who do NOT reaffirm.

1. You can rebuild your credit and wait for the derogatory account to age and eventually fall off your report. Tip: after your BK discharge, review all three of your credit reports and scrutinize them, make sure they are accurate, and scrutinize any account from prior creditors because they will get away with reporting erroneous information - it's your responsibility to review your reports periodically to ensure accuracy and to dispute any information that is not accurate. Use the web and browse credit forums for help in how to repair your credit, and how to dispute credit reports if necessary.

2. If you choose to stay in your home and make payments with NO defaults, you can pay off your loan, retain title, and sell your home, and keep that profit, just as you would have if you had not filed BK. You would then be in a much better position to apply for another loan in the future. As long as you rebuild your credit after BK, the BK notation on your credit report is no longer prohibitive to lenders after roughly 2 years have passed after discharge.

Understandably, some people cannot continue to make payments on their mortgages due to unforseen circumstances or underwater loans, and in those cases, you should always consult an attorney before proceeding to walk away so that you fully understand your legal obligations, and how it can still affect your credit.

I'm not a legal or mortgage expert, just speaking from experience, and from a great deal of learning. The bottom line, when you have questions concerning your obligations, your mortgage terms, your options, always consult an attorney, and not necessarily the attorney who filed your bankruptcy, since they weren't so helpful in neglecting to inform you of your rights in the first place.


Sub: #9 On reaffirmation
Sat, 06/23/2012 - 17:10

I guess we are lucky. Our ch 7 bk was discharged almost 3 yrs ago. We had a mortgage loan with Taylor Bean & Whitaker and a second with BofA. We were also advised by our atty not to reaffirm anything. Meanwhile,TB&W who held our first mtg was going thru a very lengthy BK at the same time. It was just finalized and our new lender has been reporting our mortgage for 7 months now with no mention of our BK and on time payments. Meanwhile, BofA apparently sold all of their second mortgages to Greentree financial. We were never late. We would love to refinance and get a new mtg at a much lower rate, we are at 6.1, however, because we did not reaffirm our second mortgage, Greentree will not agree to subordinate our loan. We obviously don't have $25000 to pay off the second. While we realize if we were able to refi harp 2.0, we would be losing our "safety net" by having it discharged in BK, we would be Ok with that. We have no plans of moving and our financial status is now good. We could save a couple of hundred dollars a month. Greentree has a terrible reputation and we cannot go back and reaffirm so guess we will just stick it out!


Sub: #10 What is best it seem???
Fri, 06/08/2012 - 08:30

It seems to me that if one has gone through Chapter 7 bankruptcy, everyone on this post is saying that is better not to reaffirm. We did talk to our lawyer about this, and he advised that is in our interest not to reaffirm as if something worse happens, we can just walk away without any repercussions. In a way it seems that we are renters in our very own home. :) And yet, from what I read (which was a concern of ours), that if we do sell our home, we only pay the bank what we owe them, and then the rest of the money is ours. (Question? How soon can one sell their home after bankruptcy?)
From my reading of this post, that seems to be the case if we foreclose also, that we would get whatever is leftover after the bank is paid.
Thus far we are faithfully paying our 1st and 2nd mortgages on time. It would be great to refinance both of these but then it is my understanding, that we would again be liable if worse things happen in the economy. We would then have to pay the lender whatever is owed after they take whatever the house would be sold for. All of this is very confusing.
We filed bankruptcy last July 2011. Our lawyer also told us to file a credit report every so often and told us that if the credit report doesn't show that we are faithfully paying our mortgage, that we have to let them know that. It is then the responsibility of the bank (Chase), as I understand it, to start reporting that we are paying our monthly payments so as to reestablish our credit. We shall see how that goes.
We did get a credit card recently (that was a miracle), and are using that very sparingly to rebuild our credit also. Pay it off monthly.
Things are still tight for us, but we are so glad that the credit debt is gone.
However, sure wish things were a bit clearer about "to reaffirm or not to reaffirm!" All of this seems cloudy even in all the posts. We don't want to do anything dishonest, or illegal, and that is also a concern of ours.

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