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Modifying Liens Post BK - Got to read the fine print

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  • Modifying Liens Post BK - Got to read the fine print

    Just got our first post BK7 lien modification for a rental property and sure enough in the fine print was the statement that this was recourse loan. That would have negated one of the key benefits of our bankruptcy so we sent it back to have the language removed.

    The terms and conditions were OK but not with a de-facto reaffirmation statement.

    A word to the wise.......
    Chap 7 Non-consumer --Realized headed for bankruptcy Nov 2010 --Started planning BK7 Spring 2011 -- Filed Sept 2011 -- 341 & Continued 341 Meetings Nov 2011 --No Asset Case Nov 2011 --Discharged Jan 2012 --Closed Feb 2012

  • #2
    You need to understand, the agreement you received is a "standard" modification agreement. However, that agreement DOES NOT supersede the bankruptcy. The loan is discharged in BK. A modification does not act as a defacto reaffirmation, only a NEW loan (e.g. a refinance) creates a post bankruptcy obligation to the mortgage lender in the event of a deficiency.

    Comment


    • #3
      Exactly. The wording really means nothing since the underlying Promissory Note was discharge in bankruptcy. There is no magic "back door reaffirmation" no matter how you slice it. In fact, I'd love to do a post bankruptcy modification where I discharged the loan. I'd absolutely love being back in the Bankruptcy court with the Judge and saying that the bank is trying to collect on the discharged debt by attempting a back-door reaffirmation.

      i will add that if you can get them to modify the language, then that's fine too. Less confusion should anything happen in the future. I modified my language after filing and prior to discharge. I had specific language that it was not a reaffirmation of the debt... although all the other language was "boilerplate" (standard).
      Chapter 7 (No Asset/Non-Consumer) Filed (Pro Se) 7/08 (converted from Chapter 13 - 2/10)
      Status: (Auto) Discharged and Closed! 5/10
      Visit My BKForum Blog: justbroke's Blog


      I am not an attorney. Any advice provided is not legal advice.

      Comment


      • #4
        Thank you both for the feedback. I am nervous regarding these modifications and I don't really trust the banks. I will keep pushing to modify the language to make it crystal clear it is not a reaffirmation. CYA

        JB, What language did you use when you modified your loans? If it was accepted language, it might shorten the iteration time with the banks. Thanks
        Chap 7 Non-consumer --Realized headed for bankruptcy Nov 2010 --Started planning BK7 Spring 2011 -- Filed Sept 2011 -- 341 & Continued 341 Meetings Nov 2011 --No Asset Case Nov 2011 --Discharged Jan 2012 --Closed Feb 2012

        Comment


        • #5
          Originally posted by nohoneymoney View Post
          JB, What language did you use when you modified your loans? If it was accepted language, it might shorten the iteration time with the banks. Thanks
          My modification was ONE PAGE. I can't find a copy of it, but it read something like "this is not a reaffirmation of a discharged debt". Or something like that.
          Chapter 7 (No Asset/Non-Consumer) Filed (Pro Se) 7/08 (converted from Chapter 13 - 2/10)
          Status: (Auto) Discharged and Closed! 5/10
          Visit My BKForum Blog: justbroke's Blog


          I am not an attorney. Any advice provided is not legal advice.

          Comment


          • #6
            Clear and simple is always better. Thanks
            Chap 7 Non-consumer --Realized headed for bankruptcy Nov 2010 --Started planning BK7 Spring 2011 -- Filed Sept 2011 -- 341 & Continued 341 Meetings Nov 2011 --No Asset Case Nov 2011 --Discharged Jan 2012 --Closed Feb 2012

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            • #7
              UPDATE: Just got a reply from the bank and sure enough they believe that the lien modification includes reverting back to a recourse loan. We pointed out that our obligation to the underlying note has been discharged in the BK but that did not alter the position of the bank's representative. They were firm, either we agree to making it a recourse loan on no modification. We said we would think about it....actually stalling. Maybe the bank (AURORA) is like the DMV, the answer can change from window to window. I'll let you know how this goes. (No wonder people can't get mortgage modifications.....)
              Chap 7 Non-consumer --Realized headed for bankruptcy Nov 2010 --Started planning BK7 Spring 2011 -- Filed Sept 2011 -- 341 & Continued 341 Meetings Nov 2011 --No Asset Case Nov 2011 --Discharged Jan 2012 --Closed Feb 2012

              Comment


              • #8
                It doesn't matter what they "think"... it is settled caselaw. There is no zombie reaffirmation. You should press them to consult their legal department and ask the question. I would love to play this game with my lender (Bank of America).

                In my Adversary Proceeding, my creditor actually said that their in-house attorney told them that they could continue billing me for pre-petition charges! Fortunately, the BK department supervisor didn't believe the in-house counsel and hired outside-counsel! The internal counsel was dead wrong. It happens all the time!
                Chapter 7 (No Asset/Non-Consumer) Filed (Pro Se) 7/08 (converted from Chapter 13 - 2/10)
                Status: (Auto) Discharged and Closed! 5/10
                Visit My BKForum Blog: justbroke's Blog


                I am not an attorney. Any advice provided is not legal advice.

                Comment

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