New here-reaffirmation question

[gary36]

Hi all, Im new here and just now starting the chapter 7 process. Wondering if anybody didnt reaffirm on home mortgages and how if worked out if you didnt. Thinking about not reaffirming but not really sure what to do.

[ConnieS]

Don't know if this will help, but our bank never asked us to reaffirm. They just continued to deduct payments all along.

[HHM]

First off, do you want to keep the house or not, that is the first question that must be answered.

You'll find varying answers on this...

However, the letter of the law is, you must either Reaffirm, redeem or surrender. The new law no longer provides for what was known as a ride through, but some mortgage companies and banks are allowing them nonetheless...

But here are the risks...if you do not reaffirm, the bank can foreclose on you anytime they want. However, most won't so long as you make the payments, but if you do not reaffirm, the debt is discharged, and you no longer have a right to property which secures the debt. Also, when it comes to credit reporting, you will have no leg to stand on to try and get the mortgage company to report you mortgage positively.

[gary36]

Yes I do want to keep the house.I guess the real question is if I dont reaffirm is it like I just renting again? Will I still own the house? Can I sell the house a few years down the road? Also 10 years down the road when the bankruptcy is removed from my credit report will the house remain on my report in bankruptcy?

[HHM]

I guess my question to you, why "not" reaffirm and live with certainty. You're going to be making the same payments anyway. So, the real issue is whether you want to live in the house with a cloud of uncertainty surrounding your status, or, by reaffirming, you have all the rights and certainty about the property as you did before your filed BK. Regardless if you reaffirm, you still owe the money to the bank, or more accurately, the house owes the money to the bank. Whether you reaffirm or not, when you go to sell the house, you still have to pay off your mortgages with the proceeds.

When it comes to mortgages, there is almost no benefit to not reaffirming. At least for a 1st mortgage, because most states do not allow deficiency balances in foreclosure in the first place...the only benefit to not reaffirming a secured debt is that if you default in the future, and the property is worth less than you owe, the creditor cannot come after you personally for the difference...but since, in most states, the 1st mortgage holder cannot seek deficiency balances anyway, its a moot point, so there really is not reason to not reaffirm if you want to keep the house.

As for the legal status, yes, you still own the house, and the bank still has a Deed of Trust, and you could sell it in the future, and when you sell the house, you will have to pay off the bank in full.

[gary36]

I guess my question to you, why "not" reaffirm and live with certainty. You're going to be making the same payments anyway. So, the real issue is whether you want to live in the house with a cloud of uncertainty surrounding your status, or, by reaffirming, you have all the rights and certainty about the property as you did before your filed BK. Regardless if you reaffirm, you still owe the money to the bank, or more accurately, the house owes the money to the bank. Whether you reaffirm or not, when you go to sell the house, you still have to pay off your mortgages with the proceeds.

When it comes to mortgages, there is almost no benefit to not reaffirming. At least for a 1st mortgage, because most states do not allow deficiency balances in foreclosure in the first place...the only benefit to not reaffirming a secured debt is that if you default in the future, and the property is worth less than you owe, the creditor cannot come after you personally for the difference...but since, in most states, the 1st mortgage holder cannot seek deficiency balances anyway, its a moot point, so there really is not reason to not reaffirm if you want to keep the house.

As for the legal status, yes, you still own the house, and the bank still has a Deed of Trust, and you could sell it in the future, and when you sell the house, you will have to pay off the bank in full.

Thanks HHM! I appreciate the answer. Any clue on how this would affect my credit report in ten years?

[lrprn]

Any clue on how this would affect my credit report in ten years?

Ten years after filing, your bankruptcy will roll off your credit report like it never existed. As long as post-bankruptcy your credit payments are made on time, you don't run credit cards near their limits, you pay off all loans on time, etc. the answer to your question is that there won't be an effect on your credit report in ten years.

Many Ch 7 filers recover 90% from filing after 2-3 years if they are financially responsible and rebuild their credit carefully. Ch 13 filers who reaffirm their mortgages and car payments *AND* have lenders who continue to report their payments to the credit bureaus throughout their 3-5 years (not all lenders do this), can emerge from Ch 13 and quickly get favorable loan and credit card terms.

[gary36]

Thanks, but what I mean is how will my report look for my mortgage after ten years if I dont reaffirm it? Its gonna cost 300 extra dollars to reaffirm this and I really cant afford it right now. Will my mortgage still report after ten years if I dont reaffirm?

[HHM]

Who is saying it will cost you an extra $300?

As for credit reporting, if you DO NOT reaffirm, it will ALWAYS be reported as Included in Bankruptcy, even after your bankruptcy drops off your credit report in 10 years. Also, the bank will probably no longer report any payment history. So, you will be makeing all your mortgage payments on time, but will not see any benefit from doing so on your credit report. (Although, even after you reaffirm, some banks still don't report payment history, but I think you have good grounds to dispuate that fact).

[gary36]

Who is saying it will cost you an extra $300?

As for credit reporting, if you DO NOT reaffirm, it will ALWAYS be reported as Included in Bankruptcy, even after your bankruptcy drops off your credit report in 10 years. Also, the bank will probably no longer report any payment history. So, you will be makeing all your mortgage payments on time, but will not see any benefit from doing so on your credit report. (Although, even after you reaffirm, some banks still don't report payment history, but I think you have good grounds to dispuate that fact).

Thanks for all your help HHM. I really appreciate it. Thats what my lawyer charges for each affirmation. An extra 300 bucks on top of the 1399 fee it cost to file.