If I Do Not Reaffirm My Mortgage in Chapter 7, Do I Automatically Lose Title to my House?

Jonathan,

I’m an Arizona bankruptcy lawyer, and I like your discussion of reaffirmations better than my explanation of reaffirmations.

So I’m going to link my discussions of this topic to your blog, because this is one that you explain very well!

Keep up the good work. You have a great bankruptcy blog!

I filed Ch 7 bk back in April 2009 and my statement of intentions was to reaffirm my motorcycle payment with Harley Davidson Financial. However, my lawyer did not think it was in my best interest, so the papers were never signed / returned. I have been regularly making payments to HDFSI and they have not called or mentioned anything about taking the cycle.

My discharge happened on September 1st, 2009. Should I be worried that Harley might change their mind and try repossessing the cycle? I wish there was a way to work out a written agreement that they wouldn’t; however the automatic stay is technically lifted.

Do you think they will bother? There are still 4 more years of payments left, is it worth taking the risk of just continuing to “ride and pay”? Is the statement of intentions enough to show a bankruptcy judge “hey I wanted to but my lawyer didn’t think it was a good idea” and Harley won’t be able to repossess if I’m current on payments?

Thanks much!
-Tom

Hi

I live in MA and am contemplating Ch 7 bankruptcy. I am current on my mortgage payments and intend to remain so. I doubt they will let me reaffirm as it is a high payment.

I can find no clause in the mortgage note that talks about BK. My lawyer says they cannot pull the mortgage but I am nervous as he has not gone over the note with a fine tooth comb as yet.

Can they call in mortgage in MA just because I declare BK?

Jonathan,

We live in Georgia and this Dec. 2009 our bankruptcy was discharged, including the mortgage. We are planning to stay in our home for now and continue making the payment. The mortgage company asked us prior to the discharge to reaffirm, but we declined not knowing whether or not the trustee was were going to take the house. We continued to pay the house note as usual. Now that the mortgage debt was discharged along with our other debts, should we decided to sell the house in the future, Is the mortgage company entitled to any of that money since we are not reaffirming the note? Is there any mortgage to pay off? Who then, does the title go to? Technically the house is solely the banks, is that correct? And essentially we are renters, sort of speaking? Am I understanding things correctly? Or not?
The decision to not reaffirm was advice from our attorney. Says it’s in our favor not to.

At this writing, we have not been contacted by the mortgage company on reaffirmation. I do understand they have a vested interest and could foreclose, but would they since we continue making the payment? I suppose this depends on the lender.

My parents just found out that they have this same situation. They are wanting to put their house on the market and move, and when they pulled their credit it showed that they had not made any payments for the last 4 years! So it hurt their credit and they need to get a new mortgage to buy another house.

So what options do we have as consumers? How can GMAC continue to accept payments for something that technically is discharged? Isn’t that considered fraud?

Oh, and one other thing…

If they technically don’t own the home anymore, then essentially they can stop making payments. But then can GMAC report that negatively to the credit bureaus?

My chapter 7 was discharged in Oct 05. I did not reaffirm the mortgage on my house but have made all payments on time.
Is this considered a foreclosure in 2005 if I walk away in 2010?
I owe more than it is worth. Or is this a 2010 foreclosure? Need to know to apply for a new mortgage now.

I too have these questions. We filed Chapt 7 in 2003, the mortgage refuses to report all the years we have continued payments (we did not reaffirm, based on attorney’s advice that the judge would not allow it).

What I don’t get, no one ever explained to us how mortgage companies are not “required” to report your payments if you don’t reaffirm, yet if you DO reaffirm, you are at higher risk. Plus, back in 2003, no one ever explained to us we could option to re-finance or re-structure the loan to reduce interest, etc. So, 7 years later, we’ve paid the mortgage three times the amount the home is worth, we have NO credit reported, and NOTHING to show that we paid for this home!

How is that fair to consumers? How can throwing huge sums of money to a mortgage company NOT account for something? Surely, there is a large percentage of post-bankruptcy cases who chose to not reaffirm, continue to make payments, and hope to pay off in full to obtain title. But, the laws never change to protect those of us in this VERY SPECIFIC SITUATION???

@Sharon: Hello,

The discharged released your parents from personal liability for the promissory note only, they still have title interest in the property. Their mortgage company (GMAC in this scenario) can still collect monthly payments because the discharged debt in this case was a secured debt, different from a credit card for instance, so the mortgage loan itself, doesn’t “disappear” for lack of a better term, such as a credit card balance, which is written off. GMAC is not committing fraud by accepting your parents mortgage payments. They are now making “voluntary” payments to their mortgage company, as they are not legally obligated, but if they wish to keep their home, they will need to continue regular monthly payments, as the mortgage company still holds a lien on the property, and in the event of non payment, can and will legally foreclose on the property.

If payment are continued on the home, you will notice nothing out of the ordinary, other than the way the mortgage is reported on your credit report. That is a negative. However, you could walk away from a discharged property at anytime, and not be legally liable for the remaining debt.

Again, yes the property your parents property via title. They are not “renting” the home from the bank, they still have just as much rights to the home as they did before they filed bk. Understand the bk discharge simply relieved personal liability to pay the promissory note. However, as long as you make voluntary payments as you normally would required to if you hadn’t filed bk, then nothing will change. You wont lose the home, and once the balance is paid off, you own the home free and clear.

To answer your final question…No, they can stop making payments on the home at anytime they please, and GMAC cannot report any negative information to the credit bureau…in fact they can’t legally report ANY info, negative of positive ever again. HOWEVER, if they stop making voluntary mortgage payments, the bank WILL foreclose, and they will lose their home.

Thanks, hope this info helps (FYI – I work in the Bankruptcy dept for the nations largest mortgage lender)

I am in process of Chapter 7- my house is not underwater- it has $40k equity-

My attorney has recommended I Surrender the house. I insisted it say REAFFIRM.

I was never ever told what the consequences are of surrendering. I like my house and I really believe this is a catch 22. If I reaffirm and pay I can stay– if I surrender and pay I can stay-

Wow- after years of already paying- why should I surrender?

The benefit I am being told is to stay in the house and not pay. If a surrendered property is not paid, can the mortgage company force you out????

I have also filed chapter 7. I like to keep my house, but my mortgage company refused to talk to me. They said that I my BK attorney needs to submit a letter to remove the BK status of my account in order for them to work with me. I like to keep the house and pay back the mortgage and now I can not even do that. Do I have to go to court again?

Hi Johnathon,
My husband changed jobs ( it moved us 1k miles from our property) and we were trying to sell our home. We have an offer a good offer for the economy. The PMI is denying the offer because we are not 60 days late just the mandatory 30 days. We filed a Chp 7 in 2009 and was discharged in 2010 without reaffirming on the home. Can we threaten that if they don’t approve the short sale we will walk since he house was never reaffirmed on can they come after us? Will they report more neg to the credit bureau or is all that covered under the discharged? My fear is our buyer will walk since she has had a contract on the house since March and it is now June.
Thank you for your help!

I filed Chapter 7. My court day is on July 2011. I just miss one of my mortgage payment a month ago. I contact my mortgage lender because I was doing a home modification. Now they told me that my loan is at the BK dept. I want to keep my house but I’m worry that the fact that i’m behind of one of my mortgage payment is going to affect my Bk and My modification. What should I do? Thank you

Hello,
I recently had my chapter 7 bankruptcy discharged in June of this year. I have been making my mortgage payments on time since the discharge. I have been receiving conflicting information as far as if I stop paying the mortgage, whether or not it would affect my credit. My attorney advised me that my credit should not take another hit, even if they foreclosed but I hear different information from different attorneys and people. I contacted Wells Fargo today and they advised me that even if I paid the mortgage in full I would not receive the deed to my home until I reaffirmed my mortgage which means reopening my bankruptcy case and from what I understand trustees do not like doing so and this opens another can of worms as everything will be re-evaluated. It sounds as if I would have been better off indicating that I was going to surrender the property so I dont’ have to worry about a foreclosure and/or short sale going on my credit. Does anyone have experience in this area or can address my concerns? Seriously confused!

Hi, my parents have recently decided to file ch 7 on their debt, they have stopped making their monthly mortgage payments, but the bankruptcy lawyer said, that he’ll take care of the mortgage. Is this something that is common in California?

I filed a Chapter 7 BK and was discharged in 2009 and surrendered my condo. I moved out and the condo was vacant for 2 years. I was homeless and disabled and checked with the title company to see if I still had any interest in the condo. To my surprise, my name was still on title. I moved in for 4 months to get my health together and find a job. Originally, I wanted to work with the bank and get a modification. They turned me down. I haven’t paid on the condo in over 2 years, this is the weirdest thing I have ever witnessed or heard and I have no idea how this happened. The condo is in California and titled still in my name. I moved out again and title is still in my name. Can I rent it out? Can I sell it?

I have the exact same situation here. Filed in 2003, thought it was reaffirmed, it wasn’t and I have paid on time ever since. It is a rental now paying for itself. How will this play out now that I want to buy another house?

@Joseph C. McDaniel:
I live in Ohio and filed ch 7 in 2005 I was divorced in 2003 and my ex husbands name is still on the mortage. I am working with Ocwen to get his name off. The question I have is that back then they didnt do reaffimations and I called the court and was tolded the property was abandon, I still live and pay mortage every month. I called my atorney and was tolded I would be fine to keep my house.