Chapter 7 Debtor Did Not Reaffirm Mortgage – Is Her Home Now at Risk?

I used to work at a company that lent money for real property purchases, and I can tell you, we were happy as long as the debtor kept paying on the loan. We knew we couldn’t force anyone to sign a reaffirmation agreement, so as long as they had checked “will reaffirm” on their Statement of Intention, and were still making regular payments, that was good enough for us.

This is very similar to my story. We built a new home. Had a high appraisal value, at end of loan, lost all equity. Forcing us into bankruptcy/forclosure on the new house. WE wanted to reaffirm the old house, through error was included in bankruptcy. Now we will lose the new home, and whats up on the old home. On credit the debt is wiped out. Can ? I get some payment history for the payments. Also, I was told that I might call the mortgage company, and see about renegotion of the loan cost/rate/ terms? Do you suggest this?
If I stay at the old home without a reaffirm, and in 2 years when my credit starts to recoup, if I walk away will a new hit come on me, when they proceed with foreclosure, or has my current bankruptcy protected me from all this. In 2 years I think there will be many more homes, better than my old house.

question
My chapter 7 was discharged 6/20/08 we didn’t reaffirm on our mortgage. The mortgage company is now raising our mortgage $600. So we are not willing to pay. What are our options?
Pola-Michigan

Hi Jonathan:
I recently called my mortgage lender to request a reduction in my mortgage interest rate. My bankruptcy was final about 1.5 years ago. My mortgage was not made part of the bankruptcy, it was always my intention to pay it. They said they couldn’t help because the mortgage was not reaffirmed. Is this something I should do in order to lower the rates or go elsewhere to try and refinance. That option, however, would have to wait until Sept. 2009 and I would like to get it lowered now. I am current on my mortgage and that is the first bill that gets paid every month.
Thank you, kindly.

I am going through the exact same thing, I am trying to build my credit, I want to stay in the home but the mortgage company said they will never post it as “on time” with the agencies, they told me they were not even sure I could get title after 28 years, i need help . I want to keep my house, i have never been late but i also want my credit to start to be repaired. Any suggestions?

@Wendy, what do you mean “they will never post it as “on time.” Are they posting as late? Why wouldn’t you get title? That does not make any sense to me. Please send me details directly – this does not smell right.

Hi I thought I was off the mortage when I went through my divorce he was rewarded the house. And now I have allready finish my bankrupty I have done a chapter 7 am I still responable.

Hi Jonathan,

I discharged a Ch. 7 BK in March, 2008. We stated on our Statement of Intention that we intended to reaffirm the mortgage, and we also stated this at our hearing. I didn’t realize that we had to do anything beyond this and assumed it was reaffirmed. Then today I pulled my credit for the first time to see where we are a year later, and the mortgage does not show up. I called the company and they said it was never reaffirmed. The company we stated an intention to reaffirm with has since sold the mortgage so we are paying a different company. We have never been late, and I would like to show that we have been paying this $1750 every month since the BK on time, as this will help increase our credit score and make it more likely to get approval for the car loan we are currently seeking. My questions are:

1. can we reaffirm now, a year after discharge?

2. Would I just do this with the lender or do I have to re-open the bankruptcy somehow?

3. Would I reaffirm with the current lender or the original one?

I did my own bankruptcy and all went well — except apparently this! I appreciate any comments you can make.

Thanks,

Susan

I filled for ch 7 and i would like to reaffirm my mortgage but as of next year my mortgage rate may change (i have a arm loan now and it’s due to expire)and i don’t know how that may impact my payments. I also applied for a loan modification a few months ago but because of my bankruptcy everything has been put on hold. i would like to keep my house but how can i decide that if i don’t know what my payments may be.

I was discharge last year in apirl, i was going through a loan modifcation, i sign the paper and sent them in, they told my lawyer they have send the final approval back, they never did, we called every week and they to my lawyer that they don’t no what is going, then they had too what for the bankrupcy code to come of and it never did. then i call my second mortgage company and ask for my statemant, he told me they cannot send me any statement or call me, the district court will go after them, if that is true why is bank of america violating the rules, that is againest the law. thanks james

Hi,
I was discharged last Dec (2009) chapter 7. Now I just started receiving the “voluntary” statements from my mortgage company. I was not aware that i could walk away from the mortgage, as I checked my credit report and their is NO record of this mortgage that I have been paying on for 15 years.
My attorney did tell me about a re-affirmation agreement but I never got one from the mortgage company, never signed on. Have been making on time payments since bankruptcy (actually for entire loan,e 15 years)

My question is how exactly does one walk away? I mean, do I just up and pack and leave, or do I contact the mortgager and tell them I plan to walk away? Will the ensuing foreclosure go on my credit report? I need to walk away because I can not afford the repairs that are going to be needed and can not sell it for what I owe.

Thank you

Hi,
My bankruptcy was discharged 5 months ago. BAC would not reaffirm an agreement.
Can I walk away and go buy another house?
When I called during the br to reaffirm, it was a flat NO THAT the house was included.
Did my bankruptcy myself. If I can walk , I want to walk.
thanks.

Denise, my thought is that if you did not reaffirm your personal liability to pay the mortgage has been discharged. If the mortgage company takes a different position, see if they will put it in writing.

I filed chapter 7 bk on 04/13/2011 by myself in AZ. I am a joint borrower on a house. I spoke to BB&T today to let them know that I was going to keep the house. I have never been late and will continue to make pmts. They told me that my mortgage acct is in their Bankruptcy dept. and hat I could do a reaffirmation and they will send me options on this.
My questions have to do with the other joint borrower. The other joint borrower on the mortgage account is NOT filing for bankruptcy. How is having the mortgage acct. in the BK dept because of MY filing, going to affect the joint borrower? Can I do a reaffirmation on the mortgage loan even though I am the ONLY borrower that is filing? I know that if I do a reaffirmation, the judge has to approve it, are they going to require documentation from the other mortgage acct. borrower to do this?

Sue, you should probably speak to a Ch. 7 lawyer in your district to ask about the customs and procedures in your court. Generally, if you reaffirm a debt, you need only show that you have enough disposable income to pay for the mortgage obligation. In other words, your Schedule I/J budget should not show a negative monthly income. Where I practice (Atlanta), the Bankruptcy Judge is not going to ask for a non-filing party’s financials. Your joint borrower’s credit report will show that the mortgage account was involved in a bankruptcy but that should not appear as a negative on that person’s credit. As long as the payments are being made, you should not have too many issues. Again, however, it would be wise to speak to a bankruptcy lawyer about your reaffirmation options.

Thank you for your answer Jonathan. I will speak to a lawyer soon to get more info. I am thinking that I will not sign a reaffirmation. The current mortgage loan is a 30 year fixed FHA loan and the rate is 5.5. The joint borrower and I love this house and will continue to live here and pay for it, on time. Can I ask you something else? Could the mortgage company still try to do something as far as –foreclosure or anything like that —-because of my BK filing and if I don’t reaffirm? Does the joint borrower (in this case) run any risk like that?

@Jonathan: Going back to Susan’s question in May of 2009. Can you go back to your attorney to reaffirm if it was not or does a new bankruptcy have to be done? It would be nice if they can just correct it but I’m sure it is not that easy. I let them know I wanted to keep the house and the car. I went through my paperwork and found a “reaffirmation” on the car where we signed stated we agreed with the terms but nothing on the mortgage. I called the attorney’s office and they stated that the attorney thinks it is not nessessary to reaffirm and just to continue paying. Seems to be a common think attorney’s nationwide agree with. I personally would rather have it in my name and on my credit if I am paying that large mortgage every month (would like something for it)! Just wondering what the process is to get it “officially” reaffirmed? Thanks, Darren

Darren, once the Chapter 7 is closed, you would have to file a motion to reopen the case for the purpose of entering a reaffirmation agreement. Some judges will reopen for something like this but I suspect that other judges would not agree to reopen a case simply to put a reaffirmation on the record. There is also some risk in reopening a case – in theory, the Chapter 7 trustee would have the right to take another look at your budget and assets and you could find yourself facing off against a trustee who now has an active bankruptcy estate with new assets to be administered. In other words, reopening a case could open a can of worms.
Ultimately the simplest solution would be to refinance, and thus assume personal liability so that the mortgage payments will be reported again on your credit.

I filed Chapt13 in 2008 which was converted to chapt 7, due to me loosing my job. I have been discharged since Dec-2009. I recently pulled my credit reprot and found out that my mortgages payments have not been reported to credit bureaus. I sent inquiry to my mortgage company who sent me back a letter stating that payments which have all been made on time will not be reported until I reaffirm my mortgage. My bankruptcy attorney told me none of this. I am not sure what to do at this point. I am terrible upside down with my mortgage with all the forclosures in my subdivision.

@Benita: when you converted to Chapter 7, you were discharged from all personal liability arising from unsecured and secured debts. In the case of your mortgage, the lender retains its lien against your property but you have no personal liability. This most likely means that you can walk away from your house and mortgage without the threat of a deficiency claim. At the same time, because you have no personal liability, your on-going payments will not be reported to the credit bureaus. Given that you are upside down, you can consider (1) turning the keys back over to the lender and moving; (2) negotiate a reduced balance and lower monthly payment with the lender in exchange for reassuming personal liability. In theory, you could file a motion to reopen your Ch. 7 to file a reaffirmation but given the reduced value of the property that does not appear to make a lot of sense.

I was discharged for a chapter 7 in Jan of 2009 and the judge wouldn’t reaffirm my home loan. My wife recently left me and is now getting $300 a week from me, my home loan is $1600 a month something I cant now afford. My question is how long do I have before they come put a lock on my door? I’m now 3 days past the 1st the 15th is when they consider me late, i’m sure it varies but is there an approximation timeline?

My husband & I filed chapter 13 in 2003. It was discharged in 2008. We notified our mortgage company that we had completed the bk and thought everything was fine. In 2009 my husband was diagnosed with cancer, and we attempted to have our mortgage refinanced because my husband was laid off and we couldn’t afford the payments. the mortgage lender ignored our repeated requests and we started working with NACA, but still no response. My husband passed away in 2010, and at a NACA convention that year I was told by my lender that the investor of our loan (JP Morgan Chase) did not allow any changes to my loan for the life of the loan! So I am stuck unable to pay. However, since the bk, all we receive are informational statements. No calls. I also found out that we did not reaffirm our mortgage after the bk discharge. What is going on? Is it true that our mortgage company won’t come after me, or foreclose on the house? Any options. I was told not to make any payments (I can’t afford to), but to not leave the house. That it would probably be a long time before any action from mortgage company. No payments for over 2 years. Still haven’t heard anything from them. Feel guilty, but lucky to have somewhere to live

If I want to sell my home that I did not reaffirm, and now have no liability for, can I do so and retain the equity or the net proceeds.

@Kyle, by not reaffirming, your personal liability on the mortgage was extinguished. However, the lender retained a security interest in the property. I would argue that if you sell the home and pay off the mortgage lien, then you can retain the net proceeds. However, I can’t give legal advice on a blog so you should discuss this question with a real estate attorney in your area.

@Richard – you don’t say where you live but I will assume that the lender has to go through a foreclosure procedure before it can evict you. Rules regarding foreclosures vary but I would think you have at least a few months before you would have to leave. Your bankruptcy attorney should be able to offer more specific advice about your situation.

@Rondelle: you may want to talk to your bankruptcy lawyer. Reaffirmation is a Chapter 7 concept, not Chapter 13. Generally a Chapter 13 discharge will not eliminate your personal liability for a mortgage loan (where as a Chapter 7 discharge will eliminate your personal liability for a non-reaffirmed mortgage loan). It is very unusual for a bank to sit on a delinquent mortgage for 2 years – my guess is that they will reappear at some point.

My husband and I just attended our creditors meeting this morning. At our initial meeting, we had asked the attorney about reaffirming our mortgage and were told that in Texas, the courts would not sign a reaffirmation and as long as we stayed current on our mortgage, we were ok. The trustee did not ask us about our intentions to continue paying our mortgage. Have you had any dealing with GMAC Mortgage and if the information we were given is correct?

We were discharged from Chapter 7 in July of 2009. We did not reaffirm our mortgage but have done the whole “pay to stay” thing. We are coming on the 2 year mark and we are looking to buy a new home. Do we need to sell our home before we can get another mortgage for another since our current mortgage was discharged? We put our house on the market several months ago and decided to take it off after not much success. Are we responsible for our house or can we get a new mortgage and walk away from this one? We hadn’t realized that our payments would not be reported so we feel like we are wasting our money. We need to get into a bigger home anyway, so we are just wondering how this will all affect us.

Johnathon, My husband and I filed a medical bankruptcy in AR in 2009. Up until May of 2009 our credit rating was 790+ each. The $2400 out of pocket RX expense per month forced us into bankruptcy, since we had to borrow some of the drug costs. We thought we had reaffirmed our mortgage, not realizing that we should have tried to reafirm through our mortgagor and not our attorney. Why don’t attorney’s tell their clients this? My understanding, though, is that Chase Mortgage never reaffirms anyone’s mortgage. Question: We have considerable equity in our home and can make the payments now, but if my husband dies I will be unable to make the monthly payments on my income alone. If the home is sold for more than is owed, will I be able to claim the profit or will the bank seize it?

Hi;

We filed Chapter 7 in 2009 and it was discharged in 2010. At the time we filed we included both the 1st and 2nd and put in our personal statement that we intended to keep the home and keep making payments. We have lost a job and must move for a new one and have found out we are upside down on the home. While our 1st mortgage began reporting it discharged on our credit immediatly and sent voluntary payment letters our second did nothing. Our new mortgage company asked for a letter from the second confirming that the loan was in BK, the second is telling us that we reaffirmed the loan simply by continuing to make the payment each month (but admitted there is no signed reaffirmation) and that we are legally liable for the debt. But our bankruptcy states that the 2nd was discharged, The actions of the second are now holding up our new mortgage by refusing to acknowledge it was included in the bankruptcy and discharged. Do I have any legal recourse to force them to show it is in BK. (The new mortgage company want to confirm the discharge and no legal liability from the actual lender) Please help because we are under a severe time crunch here. Thank You

I filed Chapter 7 and did not reaffirm my loan. I loss my job just before the bankruptcy hearing two weeks ago, so now I’m unable to pay my mortgage. I did not make a payment in June, and don’t have no money for July. How soon will my house go into foreclosure since I already filed bankruptcy.

we filed a chapter 7 in 2009. we attempted to a reaffirmation on our primary residence but did not. our bankyruptcy was finalized in 05/2009 .We applied for a loan mod since then ad was denied ,our lender offered us a ‘HAMP BACK UP MODIFICATION AGREEMENT’ “.our paymeny only went down by 20.00 dollars( we still have the sam lender) , we made 9 pymnts since then ,I pulled our credit report and it doesn’t show any of our payments .we are thinking of walking away from our home or seeing if our lender will do a short sale. Can the lende still come after us if we do walk away ? and will show foreclosure on our crdeit report?

Hello – We recently filed bankruptcy chap 7 in the state of NJ. We were discharged this month. We did not sign our reaffirmation agreement with my current mortgage company. I do plan on staying in the house and pay my mortgage in full every month, but I did not want to lock myself into signing in case of something happening down the line. We have every intention of paying our mortgage and staying in our home. However, we would like to rebuild our credit and from what I have read, 5 years from now, my mortgage will not be counted as being paid. Is this correct? Any advice is appreciated.

My bankruptcy was discharged in July 2007 and I didn’t sign the formal reaffirmation agreeement on a rental property. I wanted to keep the home then but now I do not as I can’t afford to keep up the payments. Of course the Attorney advised that we would be able to walk away from the mortgage at any time in the future. However now I’m really confused about being able to walk away and how this will affect my credit and the foreclosure procedures,etc. To date all payments have been made on time. The statements say for Informational purposes only. They had been reporting to the credit bureaus but I think they’ve stopped since I called last year. The lender’s BK dept said I could do a deed in lieu of Foreclosure, then they said or they would have to go through the entire forclosure process. Would that show as a current delinquency/forclosure on my credit report or would/should it go back to showing as a debt discharged as of july 2007

This is a continuation from my previous question about the discharge in July 2007. I’m looking for options. Will the mortgage holder negotiate maybe a reduced payoff/payments/rate? The balance is approx $47,000.00 but with the condition of the property an appraisal would probably come in at half of that. Will they let me bring them a buyer. Bottom line is I’ve worked hard to rebuild my credit and I would like to protect it. If the easy answer is I can walk away and they should not be reporting because I did not truly reaffirm in the BK then I’m happy. Then I can stop making payments and if they report me as late I can show the bureaus and they will correct it, right? I have a friend interested in purchasing and fixing it up but how can they get it at a reduced price. Thanks

HI, I RECENTLY FILED BK7 IN CA. DISCHARGED ON OCT 2010, ALWAYS I HAVE BEEN PAYING MY MORTGAGE ON TIME, QUESTION I WILL GET THE FORM 1098 FROM MY LENDER? FOR MY NEXT YEAR TAXES? OR I’M JUST PAYING FOR NOTHING. CAN I DO A SHORT SALE, STOP PAYING OR JUST WALK AWAY?

Jen, I had mt chapter 7 discharged in NJ as of 5/2011 and did not reaffirm my mortgage. When I ran my credit report on 8/5/2011 I noticed the mortgage company was not reporting my good payments. I called my mortgage company and my lawyer to find out what was going on. I was told by both parties, since I didn’t reaffirm the mortgage loan it was included in my bankruptcy and the mortgage company will no longer report any payment history – being good or bad – because it is considered discharged under the bankruptcy laws. I know, it sucks but there are other ways I can re-build my credit quickly and at least I still have a roof over my head until I’m ready to refinance or even buy another home. Hope this helps. Good luck to you. @Jen:

I have a 1st and 2nd mortgage which was discharged thru chptr 7, however I am still paying 60 a month for P.M.I. is that legal to keep charging me for that?
Thank you

My Bankruptcy was discharged in Feb. 2011. My lawyer filed that we were reaffirming my home and car. The reaffirmation papers for the car were correct and I signed them. The papers for my mortgage were incorrect in that I went through a modifcation approx. a year before and the reaffirmation papers the bank sent me to sign had the terms of my loan before the modification. We gave them time to correct this and as of today 8/29/11 it still has not been done. We also filed suit regarding same and they finally answered denying everything but still have not corrected this. My question is this, we are filing a Summary Judgment Motion, if the Court goes against me can I lose my home? I am worried as I have been in this home for over 25 years and I am also worried as I have read from others that my payments are not being applied to my credit! Please advise.

Anna Marie, if the bankruptcy was discharged before the reaffirmation agreement was filed, then the terms of the unfiled agreement do not apply. Your personal liability on the mortgage may be extinguished. The question about your rights re ownership of the house and the terms that may apply to your payment obligation requires legal advice. I would think that these issues would be part of what your lawyer who filed the summary judgment motion will address, but the bankruptcy has added some complexity to your case.

Javier, generally if you do not reaffirm a mortgage, your personal liability goes away. However I would not assume anything and I would pose this question to your bankruptcy lawyer for advice specific to your case.

I seem to be reading so many stories just like mine which makes me not feel so bad.
October of 2010 I filed bankruptcy in Atlanta where I live and it was discharged February 2011 and of course my mortgage did not get reaffirmed. I found this out while trying to buy a car in April of 2011. I’m tired of fighting with the mortgage company and the only option I have is to repay my lawyer a fee to reopen the case. I don’t feel I should be paying for anything else and don’t plan on doing so. I’m curious to know will I still receive credit at income tax time? Also, since it shows the house as being part of the bankruptcy if I choose to walk away in a year or so can with no liabilty? I did a remodification on my house actually right before my banktuptcy which lowered my payments but I will have a ballon note in about 23years. I’m starting to wonder if I should just sit still rebuild my credit in other ways then rebuy in a few years. My concern like I said is tax credit while I’m still here and making sure they can’t come after my when I do leave or sell.

I fill BK7 10/2010 pro per because of mortgage and sickness. I was discharged in March of this year and did not reaffirm my home loan with B of A. But I did get a HAMP modification in January 2011 from them after trying for a year filling sure made a difference. I made three trail payment starting 2/1/2011 the last one in May and stop paying then. I heard nothing from them until today 9/15 when FEDEX delivered a permanent modification package. The terms where a change to a fix rate loan and all arrears for tax and interest ($8k) to be paid at the end of the loan in 2034. The new mod also has the HAMP Modification of Loans with Principal Reduction Alternative for timely payment. My reduction is over $10.8k per year for the next three years. As long as I don’t default on more the two payment over that time. My concern are does signing this mean I am now reaffirming the debt and can be held liable for the debt? Two they state if we do get the PRA then it will be report on a 1099c for each year. Does mean in the second and third year I might face a tax problem after the Mortgage Forgiveness Debt Relief Act expires in 2012. I really might do this but not if it put me back on the hook for the mortgage debt. Is it’s just a change in terms of the discharged loan or will signing this mean a reaffirm of loan. I reside in CA my home loan is $225k, after the PRA it would be $194k. My zillow value is around $120k and it will probably take at least 10 years before I see any equity gain.

I went for my debtors hearing on Aug 24, 2011. I think its either 60 or 90 days until final?
Neither of my mortage companies have sent my attorneys reaffirmation letters. My first is Chase and the second is a line of credit on my home with BofA.
My question is my monthly maintenance. They just sent me a letter with a whole bunch of late fees and now attorneys fees. I had just sent in one of the 3 payments I am behind. I will be caught up with my payments by the end of the month. Can they charge me all those late fees. They are not listed on my paperwork for the BK.
Linda

I filed bankruptcy in 2009 and was hoping to keep my house. I did not reaffirm however due to the economy and being a divorce single mom, I am unable to keep up with the payments or even sell because of the loss of value in my subdivision. My house is worth 100000 less than what is owed. I’ve talked with my bank, to no avail and finally stopped paying on it to survive. I checked my credit report and now Expeian is reporting me late. My bankruptcy lawyer said that since I didn’t reaffirm they are not legally allowed to report negative credit on the mortgage. I contacted Experian and they said they were in their rights. If I walk away from this home, will it make me start over again and look even worse for a credit history? I have a career in education, I just couldn’t afford my home that was purchased with 2 incomes, not just mine. I’d like to find a home more affordale.

Ok, just trying to get something straight… If I do not my mortgage, I can continue to live in my house and pay as usual OR I can simply walk away from the property and move somewhere else? (this is important for me to know as I had around $20,000 of negative equity in the home at the time of discharge)

My husband and I are currently waiting for our Chapter 7 Bankruptcy to be discharged. I guess it will take place in the next few weeks. We did not pay our mortgage for Nov and Dec and do not plan to pay it this month either. We are trying to modify it. If it gets modified will that automatically reaffirm our loan and if so will it reaffirm both the 1st and the 2nd? We are currently $123,000 upside down on our mortgage, however are only $31,000 of that is on the first mortgage…..should we stop paying the second all together and hope to settle for pennies on the dollar later down the road and what should we do with the first? Is it ridiculous to ask the first mortgage to modify our mortgage to the currant value at the current rate for the remainder of the loan? They certainly would make more money from us if they did that than if the foreclose, but is that a realistic scenario? We really do want to stay in our home but it is already at least $123,000 underwater and is in need of many very expensive repairs. We are in MA.

@Sue: I am in exactly the same situation as you. Have you learned anything new since the posting of your comment on April 26, 2011 ? I am inclined to not sign a reaffirmation agreement as a part of my bankruptcy.

My bankruptcy was discharged almost 2 years ago. I did not reaffirm my mortgage but have continued to pay it and have never been late on any of its payments. My credit report shows that I do not have a mortgage at all at this point. I want to buy a different house once my bankruptcy is 2 years old. I know depending on my credit score that I may qualify for an FHA loan at that time. My question is when filling out paperwork for a new loan at this time am I renting or do I still own a home? We are at least 10K upside-down on the property so I plan on letting it go and facing forclosure but I would like this to happen after we are already into a different home. I know once I stop paying and the forclosure happens I would have to wait an additional 3 years to qualify for an FHA loan. I am hoping our loan will already be done before the forclosure takes place and therefor our ability to buy a home will not be affected. Any and all input is welcome.

Chad, the only way to know for sure if you are still the title owner is to run a title search. There are services that will do this task for around $250 or so. If you are still the title owner, and you stop paying, I think that you would not be liable for any money but if the lender then forecloses, you will have to wait the 3 years to qualify for an FHA guarantee. Perhaps you could talk to the bank about accepting a deed in lieu of foreclosure and thus walk away cleanly.

Erin, the questions you are asking calls for legal advice and access to the modification paperwork. I suspect that if you sign a modification, you would be indebting yourself personally as well as subjecting your property to a mortgage lien. You need to seek counsel from either your bankruptcy lawyer, a real estate lawyer or both. Good luck.