Reaffirming Mortgage

[cheese]

Hi All

Been reading posts for a few weeks now, and this forum is so very helpful, calmed me down many times, thank you

We will be filing chapter 13 (possibly 7) in March. I just wanted to ask what you all think about reaffirming the mortgage. I am so nervous and confused about this. We have two small kids, and I'm worried we will end up with no place to live.
Does reaffirming, or not, make a difference in chapter 13 vs chapter 7? If we don't reaffirm, is the house still ours as long as we pay? If we miss a payment will we get thrown out? If we are current on the payments, can the bank still sell the house from under us? If we don't reaffirm can we sell it after our bankruptcy is discharged?

We owe $175k on the home and the market value is about $160k.
Our mortgage payment is what we would pay for renting an apartment in our area.

I know some of the questions sound silly, but I would really appreciate the answers, freaking out here.
Thanks

[justbroke]

Welcome to BKForum!

First, read from one of our resident experts, despritfreya, on why reaffirming a mortgage is a very bad idea. In a Chapter 13, you would not actually reaffirm anything. Anything in a Chapter 13 Plan that you are keeping just passes through normally. In the Chapter 13 you can do lien stripping** to remove liens that are not wholly secured.

Your question is perfect, normal, and an excellent question for the new debtor! I generally tell people that if they are within 10% of market value (versus what they owe), then keeping the home should not be an issue. i worry about those people that owe 50% more than the home is worth! You are in good shape in my book.

I'm assuming that your payments are on-time and you are not behind in payments. If you are behind in payments, no worry because a Chapter 13 allows you to fix that over the length of the plan (3 or 5 years). If you are behind payments and opt for a Chapter 7, then you will need to find some way to fix that issue because the lender may start foreclosing after the bankruptcy is completed/discharged.

You asked whether the bank can foreclose, and the answer is no. Foreclosures are based on what we call State non-bankruptcy laws. The lender would need to private that you are in material default (breach) of the mortgage. Typically, there are only 3 things that could cause a breach causing an "acceleration" (which precedes a foreclosure). That is, lack of adequate insurance to cover a loss (no insurance), failure to make payments (you are behind), and/or selling the property without permission from the bank (triggering a "due-on-sale" clause). If your payments are on time, no bank wants to bother you!

Ask as many questions as you like!

** Note: the Chapter 7 lien stripping issue in Florida (and the 11th Circuit in general) is headed for a hearing in the Supreme Court. That puts all of the pending lien stripping in our circuit in a stay of that appeal to the Supreme Court.

[LadyInTheRed]

I think the following quote from Des' post says it all:

“Why on earth would someone say to a creditor ‘despite my bk I will pay you and if I don’t you can sue the crap out of me’”?

The home will still be yours if you do not reaffirm. If you keep your mortgage current and otherwise comply with the terms of your mortgage, the bank will not take your home.

[AngelinaCat]

Des is a BK attorney practicing in Arizona who likes to help others by posting here.

[cheese]

Thank you

[switch625]

Hey Cheese, I'm an E.D PAer paying a mortgage arrearage through my Ch 13 plan. All I can tell you is once you file, keep paying your mortgage in a timely fashion and all will be OK. Just let your attorney know first if you have payment issues going forward.

[TXskyblue]

I did not reaffirm my mortgage. I paid off my 2nd mortgage a few months ago and they sent me a Release of Lien as normal.

If you stay current even without reaffirming, they cannot take your house. When you pay it off, you get your title just as if you had reaffirmed.

[toojerm]

If you are current, (and in a 100% payback),keep your mortgage payment outside of the plan. There is no point in paying more fees to your trustee for no reason! That guy got $7800 in fees over my ch13, insane.

[justbroke]

If you are current, (and in a 100% payback),keep your mortgage payment outside of the plan. There is no point in paying more fees to your trustee for no reason! That guy got $7800 in fees over my ch13, insane.

My Trustee would have made $42,000 in my Chapter 13 for... sending checks. That was quite absurd.

However, consider that most Districts prohibit paying your mortgage - or any secured debt - outside the plan (directly) if you have arrears. There are some Districts that allow you to keep the arrears in plan but the mortgage payment outside the plan. The problem really has to do with the automatic stay protections for things "inside" the plan.