October 1, 2014

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

I have been getting a lot of questions recently about reaffirmation and about the consequences of not reaffirming a mortgage loan.  I have previously written about the consequences of not reaffirming a mortgage debt.   The 2005 BAPCPA changes to the Bankruptcy Code attempts to force debtors to choose between reaffirmation or surrender of their collateral.  The trend I am sensing both here in the Northern District of Georgia and elsewhere around the country suggests that bankruptcy judges are not particularly inclined to force this issue.  In cases where the debtor cannot or will not sign a reaffirmation there seems to be a judicial acceptance of the old “stay and pay” process.

In those cases where a debtor does not reaffirm, there seems to be some confusion as to how this decision affects the debtor’s rights.  I received the following question from Heather, who asks the following:

Jonathan,
I claimed Chapter 7 bankruptcy back in 2004.  Sadly enough I just now looked closely at a credit report.  My mortgage wich I had maintained through the bankruptcy and have done so for the past 5.5 years said it was discharged on the bankruptcy.  Which rose many questions!  I called the mortgage holder and they said I never reaffirmed my mortgage.  I don’t know if I did or didn’t my original mortgage was with one company who sold it to another in 2006.  I no longer live in this house, it is an income property, which I also have on the market. Am I going to run into trouble selling this? And my mortgage is directly withdrawn out of my account each month if “technically” it was discharged are they able to continue to take that money every month?  I have sunk a lot of time and money into this property if it “technically” isn’t mine.  What would I lose by stopping payment on it.  I’ve already suffered the credit report deduction for 5.5 years and have managed to get my score to fair standard even with that on there.  what more can it do to me and where should I go from here.  Thanks

Here is my response: Not reaffirming a mortgage obligation means that you are not personally liable on the promissory note associated with the security agreement.   The property remains encumbered by the mortgage obligation and you continue to maintain and grow your equity interest in the property.  Your title interest does not change.

The biggest difference – you are no longer personally liable on the note.   This is a positive development in that you cannot be sued personally if you were to abandon the property and a foreclosure sale generated less than what was owed, or if the property burned down and there was no insurance.

The negative about not having personal liability – your credit report will not reflect any positives arising from the payments that you do make.  As you, personally have no obligation to make any payments, you are not personally accessing any credit.

If you were to pay off the mortgage, you would get the title just as you would otherwise.  You can still apply to reaffirm the debt and get back into a more traditional security note + promissory note situation.  You can also sell the property as you do have title interest.

As far as where to go – you will have to decide if the benefit of building credit through a positive mortgage payment history following a refinance outweighs the benefit of not having personal liability on a mortgage.

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Jonathan Ginsberg represents honest, hardworking men and women in the Atlanta area who need personal bankruptcy protection. In practice for over 25 years, Jonathan teaches bankruptcy law and practice at legal continuing education seminars and he is a founding member of the Bankruptcy Law Network. Jonathan lives with his wife and children in Atlanta.
About Jonathan

Jonathan Ginsberg represents honest, hardworking men and women in the Atlanta area who need personal bankruptcy protection. In practice for over 25 years, Jonathan teaches bankruptcy law and practice at legal continuing education seminars and he is a founding member of the Bankruptcy Law Network. Jonathan lives with his wife and children in Atlanta.

Comments

  1. 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!

  2. Joseph:
    Thanks for the kind words. You have a pretty good blog there yourself and I’m going to add it to my blogroll. Although there are some local issues that do arise in a bankruptcy case, many of the principles that debtors face are similar whether the debtor lives in Georgia or Arizona and I encourage my readers to review and subscribe to thoughtful blogs like yours that address these questions and make us all think.

  3. 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

  4. 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?

  5. 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.

  6. 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?

  7. 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?

  8. 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.

  9. 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???

  10. @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)

  11. 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????

  12. 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?

  13. 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!

  14. 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

  15. Michelle says:

    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!

  16. Alex Guerrero says:

    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?

  17. 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?

  18. 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?

  19. @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.

  20. Brenda, what you are describing is a “stay and pay.” Generally, if you continue to pay the mortgage, the lender will not take any action to foreclose against you. Because you did not reaffirm your payments your personal obligation to pay has been extinguished and you will not be liable if you decide to stop paying and move on. On the other hand, when you do not have personal liability, all those payment you make will not show up as positive marks on your credit reports.

  21. Jonathan,
    Thanks for the great blog and forum. What a great resource for those navigating the bk process. I’m just starting the Chapter 7 process and will not reaffirm my mortgage, but plan to “stay and pay.” I have a couple of questions. Will the mortgage company still issue a Form 1098 at the end of the year showing how much mortgage interest was paid? Also, I just received a permanent home modification and returned the signed documents on 1/29/12. I plan to file for Chapter 7 in mid-February. Is it likely that the bk filing will delay or invalidate the modification? I’m hoping I’ll still be able to take advantage of the reduced payment.

    Thanks in advance for any help!

  22. I filed for BK in 2005. I have a mortgage with GMAC that it was never my intention to discharge. I had never filed for BK before and did not know anything about what needed to be done. I paid him $3000 and expected him to act in my best interest. Evidently he did not file any paperwork to re-affirm the debt and now it is preventing me from refinancing. Is there anyway to get this corrected?

  23. We are in a similar situation as most of these other folks except we have about $45,000 equity in our home. We live in Colorado and were not given an option of reaffirming or not and just asked our attorney at the time of the BK (2009) to exempt our property. We were approved recently for refinancing with the current lienholder except when they ran across this problem with our home not being reaffirmed, we cannot refinance for the much lower interest rate. The bank is telling us we must reaffirm with our BK attorney and our BK attorney said our case cannot be reopened for reaffirmation. He said it is far too late for a reaffirmation agreement and he would not approve it even if it were available. It is malpractice to do so he said. Because we were never informed of “reaffirming” and because our attorney is saying he would not approve it even if it were available, I am wondering if “reaffirming” is something that is not done in Colorado? We are really confused by this and now want to refinance to get a much lower interest rate…and want to sell our home in a few years. What then?

  24. Sandy, I can’t speak to Colorado law, but reaffirmation is described in the federal bankruptcy code, which means that state law would not override it. I would probably agree with your attorney that judges are going to be reluctant to reopen a case to process a reaffirmation. I am not sure why a lender would refuse to refinance if there is no reaffirmation – I would think that all you need to do is enter into some sort of non-bankruptcy reaffirmation contract to re-establish personal liability on the loan. This might be a task for a real estate lawyer as opposed to a bankruptcy lawyer. You may need to get creative but I can’t believe that there is no resolution to this other than the sale of the home.

  25. I declared bankruptcy in florida in january 2009 and did not reaffirm my mortgage loan through Suntrust. I have been paying my montly mortgage payments along with the late fee that appears on my monthly statement. I have just been informed that since I did not reaffirm my mortgage loan the bank cannot legally collect the debt. When I called Suntrust they stated the late fees were collected in error and would refund them. Now they called back stating I should be charged a late fee, and will continue to be charged a late fee and they will not refund based on the fact that I filed Chapter 7. Please someone give me the bottom line truth!!

  26. Rebecca, I find it odd that Suntrust would be sending you a statement at all, given that your Chapter 7 discharge eliminated all personal liability for the debt. If you do not pay the late charge or the mortgage payment, you would hot face any personal liability because you did not reaffirm. However, Suntrust could decide to assert its rights against the property. Florida is a judicial foreclosure state and I practice in Georgia, so I do not know what your rights are. My Bankruptcy Law Network colleague Chip Parker handles foreclosure defense matters in Florida and he would be a good resource for this question.

  27. My situation is kind of like Sandy’s post above. I am in Kentucky. Here is my scenario – Chapter 7 bankruptcy discharged 3 years ago and no reaffirmation on mortgage. I have continued to make payments – never been late. Wish to sell my home and buy a new one. My mortgage lender said that there is a new law in place with Mae/Mac that states a non-reaffirmed mortgage is looked at (by underwriters) as a foreclosure, EVEN if never had a late payment. He stated that I can sell my home, but cannot buy a new home until my current home has been out of my name for THREE years. I verified this “new” law with two other mortgage lenders and they said they have heard of this same thing recently. My original mortgage guy said….”you might as well walk away, save money until they kick you out, and rent for three years”, rather than sell and rent for three years. I’m afraid that my credit will really be impacted if I forclose. I contacted my bankruptcy attorney to see if she knew about this new law and she did not, but said that is a little scary if that is the case due to many mortgage companies not returning the reaff paperwork in a timely fashion or at all (which is what happened to me. I wanted to reaffirm and did not know they did not return the paperwork until 3 years later when I want to sell my home and run into this new law). My attorney will reopen case and try to get it reaffirmed, but for $500. And then I still have to wait TWO years to get another loan (per my mortgage guy). Any advice about this new law? Any idea the average number of points credit score drops with foreclosure? I’m sitting at about 700 currently. THANKS!

  28. Tom, many mortgage companies will not agree to reaffirm. Your lawyer cannot force a lender to participate in the process. Unfortunately, from what I am hearing, judges are not allowing debtors to reopen cases solely to file reaffirmation agreements, so I don’t know that there is anything you can do about this.

  29. We are in a weird situation, we are buying a short sale home that the sellers filed bankruptcy on 2 years ago, they didn’t reaffirm and moved out of the property. BOA deemed the home abandoned. We sold our home and would like to move in to the short sale we are buying, the sellers are demanding that we pay rent. We don’t have a problem paying rent we just feel that any rent we pay should go to the bank and not the people. They don’t have insurance on it and say the bank is responsible for any repairs. We are in Michigan.

  30. Hello Jonathan, I have a great question for you. We filed bankruptcy in 2009, and the discharge was provided in April 2009. It is now 2012 and we were anticipating buying a new home in April 2012, but we are waiting on the mortgage company (Wells Fargo) to reclaim the house. We were recently informed that we have to be out of the house by June 19 because they are selling it to HUD. Can we buy a new home after the transfer, or do we have to wait another three years. Additionally, we have a document stating that it can never be reported as a foreclosure.

  31. I see no reason why you would have to wait three years to buy another house.

  32. K, this sounds like a mess. I would be very careful about paying rent to someone who may or may not have any rights to the property. My guess is that BOA may not be helpful but you can try with them. If I was in your shoes I would look for a cleaner deal – this one has trouble written all over it.

  33. I filed bankruptcy back in 2004 and I as well did not reaffirm the loan but continued to pay on the mortgage. The mortgage holder ceased credit reporting since then. Everytime I would call to make a payment they would read off a script, saying i was not personally or financially obligated to maintain the loan. Until recently I bought another home, now they claim I am fully responsible for the mortgage and i must maintain the loan to its fullest. But still they are not reporting any payments or credit to my credit report. I dont care I just want to walk away from the house. Are they capable of reaffirming the loan with out me actually signing a new mortgage agreement? Are they manipulating me?

  34. We filed BR and our house was not reaffirmed so I do not understand why we still have to pay PMI on the house? If the house has already but wrote off then what Private Mortgage Insurance would cover this loan?

  35. I @Jonathan: I filed in 2008 for a Chapter 7 BK-now 4 years later while attempting to apply for a refinance w/ the new HARP 2.0 I discover that my home was not reaffirmed through Wells Fargo-I tracked down the letter that my attorney supposedly submitted to WF-exempt of my loan number and property address which WF states thet never received?? My attorneys staff simply states that they never heard back from the bank. I feel like they were negligent for not properly following through since I am not an attorney and certainly did not understand the consequences until now! I am now at a loss to refiance due to this clerical error-Wells Fargo stand is that it must go back to BK court for reaffirmation-shouldn’t that be at the expense of the attorney?? Please Help!!

  36. Karen, unfortunately the situation you describe happens frequently. Your attorney completed the paperwork, returned it to the bank and then…nothing. There is nothing your lawyer can do to force the mortgage company to process the reaffirmation – it is entirely voluntary on their part. Further, trying to reach a live person who can locate the paperwork at most mortgage companies is all but impossible. You do make a good point that attorneys ought to clarify the fact that simply submitting a reaffirmation agreement does not mean that it will be processed. I have also been reading that most bankruptcy judges will not reopen cases solely to process a reaffirmation so that may not be an option regardless of who pays.

  37. I filed Chpt 7 bankruptcy 2009 in Colorado-found out six months later via credit report that my home was considered foreclosed on per bankruptcy-and then spoke to bankruptcy attorney who advised she gave me paperwork on reaffirming my debt-however strongly discouraged this-and at this point explained she would have to re open my case we would have to go to Denver court and ask for reaffirmation of mtg which would be very difficult to have done. Plus it would cost me another $1000, that I didn’t have. I talked to Wells Fargo-who said as long as I stayed in the home and paid I could keep the home and would be fine-I have never been late or missed a payment-now I am thinking of selling as I am married and my husband and I are wanting to buy another home together. I spoke to the lender again tonight-they say I have to reaffirm the mtg in order to refinance the mtg, or get another loan for a home. From what I read here-I am not sure it is worth paying a bankruptcy attorney to go back to court to possibly re-open the case, that may or may not be approved to reaffirm the mtg-that the lender may or may not process the paperwork for me to be liable for the mortgage/property.
    When selling a home without reaffirming the debt-does it cause any problems for the home seller or buyer?
    I read also about not being able to qualify for a new home loan for three years afterwards, any one have any more information on this? Wells Fargo states you cannot qualify for a refinance loan with them if you have a bankruptcy or foreclosure on your credit at all, until it falls off. Is this true for all creditors?
    I don’t have much equity built up so I am almost wondering if it isn’t worth just stop making the payments-saving the money-and using it towards buying another home with my husband as I read the lender cannot report anything further negative on my credit then they already have. How long does it take for them to kick you out of the home?…I don’t know what to do. The lender of course seemed to think I needed to go and re affirm the debt as soon as possible.

  38. Lynn Sellers says:

    We were discharged from our bankruptcy 12/09. We have made major improvements to the house and put it on the market to sell. When we tried to get pre-qualified the mortgage agent said there was a problem with Wells Fargo (our lender) not showing the payments we had continued to make. We went to the courthouse and found the letter of intent to reaffirm a car and the house. The car is correct on the credit report. We went to the bank, and they told us we did not get permission from them to reaffirm the mortgage. He said that the lawyer should have talked with them; they would send out special paperwork and then decide whether or not they wanted to reaffirm. It seems they did not choose to. There is a man who wants to buy the house for about $16,000 more than the amount of the mortgage. The bank says it would have to be a short sell; why? They also said that they will foreclose if we walk away from the house. What will this do to us? If it short sells what happens to the profit?

  39. Hello, Jonathan! We had a similar experience, and we tried to work with PNC to do a short sell. We had to move out of state, and the property was vacant. We received a court summons and they are suiing, and PNC is trying to recover attorny fees and insurance payment on the property from us. We thought that since we had not reaffirmed then we were not liable personally. We understand they must do this to gain ownership of the property. Is it a normal procedure for a mort company send a summons and sue for property that has not been reaffirmed? Unsure what to do. Thanks for your help.

  40. We filed a Chapter 7, at the end of 2005, was discharged a few months later in 2006. We kept making payments to our mortgage not realizing we were not being recorded on our credit reports for all the prompt payments. We just realized today (2012) since we tried to buy a car that our mortgage credit isn’t showing up on our credit reports. This is very disappointing because our payments are on time every month and our credit scores should be higher because of it. Now we’re finding out that we needed to “reinstate” or “reaffirm” our mortgage so that we’re still liable (or whatever), which would then be applied to our score. (If we reinstate now will our credit scores be pro-rated for all the years we’ve been paying?) I’ve learned that the only benefits of not reaffirming or reinstating is that if we walk away from this house, we are not liable for any balances the mortgage company doesn’t get from selling our home to pay off the loan (does that include HOA dues/taxes?). But I am still confused with what happens if we want to sell our house now… or refinance it? Our lawyer said if you have statements showing you paid you’re mortgage (bank or mtg co.) and show no late penalties etc., owe normal amount for the next month etc., that, that’s proof enough you pay on time. I want to know all the details of the consequences of not reinstating the loan. If I decide walk away from this house, will a foreclosure show up on my credit reports even though my mortgage payments aren’t? Why would a foreclosure show up on my credit scores if my chapter 7 bankruptcy shows I don’t have a mortgage and my mortgage payments aren’t showing at all? AND… Can I purchase another house while I’m in this one, being that my credit shows no credit for this mortgage and that I really don’t have an obligated mortgage, then walk away from this after I buy another? I’m confused.

  41. Debbie, what you are discovering is an issue that many bankruptcy filers are facing. If you do not reaffirm your mortgage, your personal liability on the mortgage note disappears. Since you have no personal liability, the lender will no longer report to the credit bureaus and your credit score will not reflect that you have made payments. This absence of positive credit history can make it more difficult to qualify for car loans or new mortgage loans in the future.

    Unfortunately I think you will find it difficult to “reopen” your bankruptcy case to get a reaffirmation filed. From what I am reading bankruptcy judges generally do not consider your desire to reaffirm a mortgage sufficient reason to reopen a case.

  42. Marcy, PMI protects the lender. Remember, as well, that your bankruptcy discharges only your personal liability. The bank still has a lien against the property that it wants to protect.

  43. Brian, I believe that the lender will issue a tax form but I don’t know for certain – I’m sure that someone from the mortgage company could tell you. As far as filing – I would wait until your modification is complete and I would read the paperwork to make sure that a BK filing does not invalidate the deal. Good luck.

  44. A client of mine is attempting to refinance his mortgage loan through Wells Fargo under the HARP 2.0 program. If refinanced, he’ll save about $500 per month. Unfortunately, Wells Fargo is telling him that he cannot refinance because his mortgage loan was not reaffirmed in a prior chapter 7 case filed over 7 years ago.

    Do you know whether failure to reaffirm a mortgage loan would prevent a later refinance? The guidelines for the HAMP program do not require reaffirmation for a loan modification, but I have not found similar specific guidance regarding refinance under HARP.

  45. Jonathan, I have a similar issue as the people. I have filed chapter 7, had wells fargo not reaffirm the loan, but continued to stay in the home making on-time payments. Until i was told by other bankers to just leave because I couldn’t get a house until I got them to foreclose or agree to a Dee-in-lieu. I have moved out and still trying them to take the house. What i’d like to know, is who is responsible the property taxes that come do at the end of the year?

  46. I filed Ch 7 BK and it has been discharged for two years. The question I have is the 1st mortgage was never reaffirmed and included in the bk. I have equity in the house. If I sold the house do I have to pay off the first mortgage included in the bk or do I walk away with the entire sale price of the house.

  47. By not reaffirming your first mortgage, your personal liability to the lender was extinguished. However, this lender still has a lien against the property. So, if you sell the house, you still have to pay off the first mortgage.

  48. Eric, depending on the state where you live, you may be if you are still the title owner.

  49. Susan, I have not had any opportunity to study or litigate anything having to do with HAMP. If you find an answer to your question, please let me know – I’d be happy to publish a guest post from you on that topic.

  50. You should not be personally liable for a debt discharged in bankruptcy. I would discuss this matter with your bankruptcy lawyer.

  51. Lynn, I am not familiar with a “letter of intent” to reaffirm. Perhaps you are referring to the Statement of Intentions in your Chapter 7. The bank is correct in stating that a reaffirmation is a contract that must be entered into between you and them – it is document usually prepared by the bank, sent to your lawyer for your signature and then filed with the clerk of bankruptcy court. I suspect that the bank calls any deal to sell a property where there was no reaffirmation a short sale. Hopefully, since the numbers work, you’ll be able to get this deal approved.

  52. If your Mortgagee is current but have some late fees dues and the Mortgagee Company is refusing to take your payment because you are in Chapter 7 What should you do. I want to
    keep the house – reafirm the MTG. Should I just keep the payment every month until the Bankruptcy is over and then send the payments to them. I filed Bankruptcy on my own and do not have a lawyer.

  53. Anne, if the mortgage company is refusing to take your payment, I would not assume that they will accept your payments after your case is closed and allow you to stay in the house.  I would strongly suggest that you speak with a lawyer in your area about converting to a Chapter 13 or learning more about the practices of this mortgage company.  I think that you are making a mistake in assuming anything that the mortgage company may or may not do.

  54. I have a chapter 7 discharge from 2010. My mortgage company has reported it on my credit, should this be reported or just go under the bankruptcy? None of the unsecured loans show up separately . When we decide to give back the title, will they report it as a foreclosure that starts the day we handed back the title or is it reported from the day of discharge? And does Statement of Intention mean anything even if it says we reaffirm even if we did not make any other agreements? The Judge stated our home was discharged. Also if I am making mortgage payments and they are excepting them as nothing ever changed when I hand back the title can they come after us saying that because we paid we enter into any other agreement?? I am from New Jersey and my house is a financial bleed.

  55. If the  mortgage company is reporting that you still owe money on a debt that was discharged in bankruptcy, that would seem to be a clear violation of the Fair Debt Collection Practices Act.   If you did not reaffirm while in your Chapter 13 but have continue to pay while remaining in the house and you now want to leave, my belief is that you can walk away without owing anything to the mortgage company.  Note that I practice in Georgia and I do not offer legal advice on this blog.  You should check with a New Jersey lawyer about the implications of walking away.

  56. Jasmyn, I think you need to pose these questions to a good mortgage broker who can advise you about where you stand with regard to qualifying for a mortgage post-bankruptcy where there was no reaffirmation.  My sense is that bankruptcy judges are reluctant to reopen cases to allow for the filing of reaffirmations so that may not be an option anyway.

  57. John, if you did not reaffirm your morgages, then you have no personal liability.   There is no reaffirmation absent the paperwork.  I would discuss with your bankruptcy lawyer – perhaps a firmly worded letter would be in order.

  58. Ok, I found you through a search engine while searching for info about my bankruptcy issue. I’m in Texas & below is the short – as short as I can go & get you the info you might need to answer my questions.
    Here goes:
    Back in 2009 or 2010 (sorry can’t remember exactly) my husband & I filed a Chapter 13 after I had some health issues that caused me to end up losing my job & medical bills started adding up. [yes we used an attorney] We made every payment we were suppose to make on the Chapter 13 – on top of that payment we were paying our regular mortgage payment which was on the Chapter 13, but was to be paid outside of it. We ended up working with the Mortgage company to do a Modification on our loan which we were finally approved for after 3 or 4 months [the attorney knew everything that was going on during this time] in Jan 2011 we got all of our Modification paperwork which had to be signed & returned with the intial payment within like 3 days – I called my attorney who told me to get everything sent back to the Mortgage so that we didn’t lose getting the Modification. So I sent all the paperwork back & everything was good on the Mortgage companies side. In April the attorney called me up asking about it & I told her “yes we got the Modification back in January don’t you remember me calling & talking to you about it?” She did not. She proceeded to basically gripe me out saying that we were suppose to get premission from the Chapter 13 Trustee & seen she screwed up & I had lost the job I had gotten since filing she suggested that we convert to a Chapter 7 which we did in or around April 2011. Our Bankruptcy was discarged on July 29, 2011.

    The Mortgage company is telling us that if we did not file a reaffirmation they will not report to the credit bureaus nor will they let us access our account through their website. They said we would have to refinance the loan which we don’t want to do because that is basically what the Modification did. They extended our loan out to where from 2011 we have a 45 year loan – didn’t know they had those, but that is what we got.

    So here’s my question:
    If the automatic stay on the Chapter 13 was lifted for us to do a Loan Modification with the Mortgage Company before we converted to the Chapter 13 is there any way that we can get the mortgage company to report to it on our credit that we have a home loan?

    Oh Just so you know our Attorney was terrible & I have tried to contact her office since our Chapter 7 was discharged about this & she will not return my calls. I have also tried to find another local bankruptcy attorney, but so far no luck in that department.

    Thanks for any info you can give.

  59. Audrey, there is no way that I am aware of to force the mortgage lender to report anything to your credit. The question I would have – did your Chapter 7 discharge cancel your personal liability for the loan as set out in the mortgage modification. If so, you could walk away from the 45 year loan or use the threat of doing so to try to negotiate better terms. Assuming you have no personal liability you may want to talk to a mortgage broker about getting you into a more reasonable mortgage. If that is not possible, it may be time to consider walking away as the amount of interest you will pay in a 45 year loan is astronomical.

  60. Hi. My ex-husband and I filed Chapter 7 in 2007. We did not reaffirm our mortgage with Beneficial. I continued to make the monthly mortgage payment on time each month, even after he moved out in 2009. The deed was transferred into my name only at the time of the divorce. I remarried and decided to move in 2012. I called Beneficial to see what I needed to do with the house and was told I needed to do a deed-in-lue, but if I chose to walk away from the house they would not come after me. In July 2012, we moved. A realtor came out and met me at the house and appraised it for Beneficial to do the deed-in-lue. As of now, I still have not heard anything from Beneficial as to what is going on with the house. We moved out in mid July, turned off all utilities and the house has sat empty since then. The mortgage shows on my credit report with a $0 balance. Should I do anything about this or just let it ride? Someone told me that I could possibly sell the house and pocket all the money from the sale. It doesn’t seem right to me, but I don’t know.

  61. Heather, I would be very careful about selling the house in the absence of legal advice. We live in a strange time, where mortgage companies are basically sitting on empty houses that they seem to not want to process. Technically you are still the title owner so it would appear that you have the right to sell it – whether there would be consequences to such an action is the question and that will depend on the state of the law in your jurisdiction.

  62. Our mortgage was discharged by bankruptcy. We continue to stay and make payments. The mortgage had a balloon payment, my question is “can the lien holder enforce the balloon payment on the property?” Or we be able continue to make voluntary payments past the balloon date?

  63. I would argue that the underlying note has been discharged. You can’t be sued personally but the lender could try to foreclose since there is no reaffirmation. I would see what you can negotiate.

  64. Claudiu Lorentz says:

    How or with who would you apply to reaffirm the loan? If you keep making payment on the house can the bank decide to sell the house to someone else?

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