My mortgage presents and undue hardship. Now what?

[Keebler]

I see on PACER my mortgage reaffirmation has been filed and been found to represent an undue hardship. (My mortgage is $450 per month and I have about 40% equity. I'm NOT going to walk away from the equity or rent anything for less.) So...

It was signed by the bank and my attorney but it has a paragraph showing the following...

I believe this reaffirmation will not impose an undue hardship on my dependents or me. I can afford to make the payments on the reaffirmed debt because my monthly income (take home pay plus any other income received) is $3,916 and my actual current monthly expenses including monthly payments on post-bankruptcy debt and other reaffirmation agreements total $4,075 leaving -$109 to make the required payments on this reaffirmed debt. I understand that if my income less my monthly expenses does not leave enough to make payments, this reaffirmation agreement is presumed to be an undue hardship on me and must be reviewed by the court. However, this presumption may be overcome if I explain to the satisfaction of the court how I can afford to make the payments here: (blank)

So I'm wondering what will be the result of all this? Will it be necessary for me to respond at some point? Is anything bad going to happen?

[JRScott]

I'm not sure but I think you can have a hearing before the judge.

With the bank and lawyer signing it I hope it'll go through for you.

[lrprn]

Keeb, if you didn't have a lawyer, then the reaffirmation would have had to go before the bk judge in your local bk court for approval to make certain you weren't being ripped off. This is the single good change for debtors to come out of the awful 2005 bk law.

However, you do have a lawyer. In this case, all that's required is that your lender and lawyer both sign the agreement stating that they feel it's not an undue hardship for you to still be legally bound for paying this loan in full and they have.

I'm not a lawyer, but this sounds like a typical "give you a legal renegotiation option" clause in case your income does fall and it becomes impossible to keep up on the mortgage payments before the loan is paid in full.

Hopefully one of our more "legal eagle" members or mods will come along for a more reliable interpretation.

[AngelinaCatHub]

Keeb, if you didn't have a lawyer, then the reaffirmation would have had to go before the bk judge in your local bk court for approval to make certain you weren't being ripped off. This is the single good change for debtors to come out of the awful 2005 bk law.

However, you do have a lawyer. In this case, all that's required is that your lender and lawyer both sign the agreement stating that they feel it's not an undue hardship for you to still be legally bound for paying this loan in full and they have.

I'm not a lawyer, but this sounds like a typical "give you a legal renegotiation option" clause in case your income does fall and it becomes impossible to keep up on the mortgage payments before the loan is paid in full.

Hopefully one of our more "legal eagle" members or mods will come along for a more reliable interpretation.

[WoodSprite]

Hi, Keebler - it's not quite the same, but my car reaffirmation put me in negative territory on paper, too. I signed it AT my 341, and my attorney told me to be prepared to answer the trustee's question about why I thought it would not represent an undue hardship. But the trustee never asked - and she was very sharp.

I think lrprn and 'Hub are on the right track, here. Surely one of our paralegals will be along any minute with something more than a gut reaction!

[LegalBeagel]

You saw this paragraph on PACER, and that one paragraph led you to believe that your mortgage had been determined to present an undue hardship? I must be misunderstanding you because I think you are jumping to conclusions. Do you see where a judge has determined this? Who said it presented an undue hardship?

This is simply a required boilerplate paragraph.

[Keebler]

You saw this paragraph on PACER, and that one paragraph led you to believe that your mortgage had been determined to present an undue hardship? I must be misunderstanding you because I think you are jumping to conclusions. Do you see where a judge has determined this? Who said it presented an undue hardship?

This is simply a required boilerplate paragraph.

The paragraph appears in my reaffirmation agreement.

It says right in the paragraph: "I understand that if my income less my monthly expenses does not leave enough to make payments, this reaffirmation agreement is presumed to be an undue hardship on me and must be reviewed by the court." It also shows my income less than my monthly payments and the corresponding schedules are also attached.

So then, it's an undue hardship unless the court rules otherwise. The court hasn't ruled and there's no sign of any hearings.

[LegalBeagel]

Ok, I missed that, it shows negative $109.00. I'd stop reading PACER, and call your attorney. No need to worry unless your worries are confirmed by your lawyer. Let us know how it turns out.

[AngelinaCatHub]

Uh, stop reading PACER, and call your attorney. No need to worry unless your worries are confirmed by your lawyer. Let us know how it turns out.

I'll second that. Mr. 'Beagle is right and I believe it to be an escape clause. 'Hub

[Keebler]

I learned a long time ago that any business that survives on customers they'll never see again (like Bankruptcy attorneys) is almost always substandard.

My attorney is the best I can find, but I still don't bother calling them without having a good idea of the answer in advance.

At the very least, the reaffirmation agreement had a spot where I could have made the case as to why my mortgage would NOT present an undue hardship but nothing was mentioned at all. The only communication from the attorney was a large envelope with stickeis showing "sign here" in several places.

What I haven't mentioned is how it was already the second draft due to an incorrect loan amount on the first and it was late and needed to be returned quickly. Also, the cover letter from the MORTGAGE COMPANY'S attorney also requested proof of insurance because they thought the collateral was an AUTOMOBILE. Needless to say, the whole Bankruptcy system seems to be fat dumb and lazy and I don't completely trust any of them to be looking out for my best interest.

Thanks again to everyone for the outstand support!

[b_girl]

When we signed our reaff agreement, the amount in those spots was incorrect as well...we had more money available than it indicated because all of the discharged debt was still included in the figures. Is that the case for you? If so, I wouldn't worry too much..I think the judge/court can extropolate that once those debts fall away, you will have the money to pay this bill...otherwise, you wouldn't be signing the agreement. You might prepare to be questioned about it though and have the true figures ready just in case...I wouldn't leave it up to the lawyer (or his office).

[Keebler]

When we signed our reaff agreement, the amount in those spots was incorrect as well...we had more money available than it indicated because all of the discharged debt was still included in the figures. Is that the case for you? If so, I wouldn't worry too much..I think the judge/court can extropolate that once those debts fall away, you will have the money to pay this bill...otherwise, you wouldn't be signing the agreement. You might prepare to be questioned about it though and have the true figures ready just in case...I wouldn't leave it up to the lawyer (or his office).

The schedules on my petition showed negative disposable income without including any discharged debts! In fact, I was waiting for someone to ask how I had spent more than I earned without using credit but it hasn't happened yet.

I have mentally prepared my rebuttal but I was hoping someone would give me a clue when, how and if it'll actually be brought up.

[b_girl]

Can you afford the payment? I think that's the key. Ask your attorney if he's against the reaff, but I suspect if he/she were, it wouldn't have been submitted in the first place. Your attorney has a legal responsibility to keep you from making such a huge mistake as signing a reaff that isn't really in your best interests. If your attorney had no problem with it, I doubt the judge or the trustee will, no matter what figures were listed on the reaff.

[Keebler]

Can you afford the payment? I think that's the key. Ask your attorney if he's against the reaff, but I suspect if he/she were, it wouldn't have been submitted in the first place. Your attorney has a legal responsibility to keep you from making such a huge mistake as signing a reaff that isn't really in your best interests. If your attorney had no problem with it, I doubt the judge or the trustee will, no matter what figures were listed on the reaff.

You make a good point.

One answer is that I need to live somewhere and I couldn't rent anything for less than what I pay on my mortgage. From a practicle standpoint, my situation is somewhat delicate and it'll be important for me to follow a strick budget to be sure an expense as important as housing is always paid and other less important expenses are minimized.

My answer then is, I NEED to be able to afford it. I'm convinced there's other expenses on my schedules that I can minimize and fit everything in to my income.

One helpful change is a vehicle I originally intended to reaffirm will almost certainly go back to the credit union. (The credit union made the decision easy by requiring me to reaffirm 2X the vehicle's value due to cross-collateralization.) The challenge will be surrendering all the vehicles in the household and then replacing them without any kind of monthly payment. And, I'll need to save up to buy the replacement vehicle with the extra money that doesn't exist in my monthly budget.

[b_girl]

I feel for you. We're almost as tight here as you are. We are losing one vehicle because we can't afford the payment and we have no money to replace it, so we will be down to one vehicle soon...not sure how we're gonna work that, but I feel fortunate we have at least one. Rent is also more expensive here than owning, so we reaffirmed both our mortgage and our heloc, but it will be tight and we also will have to work hard to make sure we pay in a timely manner every month. It's really hard (and risky) reaffirming a home when you're this tight on money, but I totally understand the reasons. Good luck and wishing you the best!