Why reaffirming a mortgage is a very, very bad idea.

[IBroke]

No, the 9th Cir. BAP decision is not binding in Florida which is, I believe, in the 12th Circuit - not sure. . .) but it could influence a court in your district.

The Bankruptcy Appellate Panel (BAP) is the 1st level of appeal - decisions out of it are binding on the bk courts within the circuit until the Court of Appeals for that circuit renders a ruling changing it.

Des.

Thank You so much, Des.!

Your info is highly appreciated. BTW, I think I located a Circuit-Map and Florida should be 11th Circuit.

I have to agree that the decision in the 9th circuit is VERY strange. Considering a second mortgage "unsecured" right from the start makes no sense to me. If that's the case, it is hard to make an argument that just the exact same mortgage can't be stripped in a CH 7 because it is all of a sudden considered "secured". And if the court shares the opinion that it is unsecured, wouldn't that mean a second mortgage couldn't foreclose? It simply makes no sense...

Since i grew up in another country, this entire court-system is still like a foreign language to me - and decisions like that certainly don't make it any easier to understand..

Once again, THANK YOU so much for your time and efforts!

[ironpirate]

Question, I didn't reaffirm my mortgage and say 2 years down the road I say screw it and leave. I wouldn't be responsible for any deficient remaining balance and would not affect my credit?

[keepinitreal]

Question, I didn't reaffirm my mortgage and say 2 years down the road I say screw it and leave. I wouldn't be responsible for any deficient remaining balance and would not affect my credit?

You would not be responsible for any remaining balance.
I think your credit would be affected by the new foreclosure.

[IBroke]

You would not be responsible for any remaining balance.
I think your credit would be affected by the new foreclosure.

That's correct.

[ironpirate]

Does a non reaffirm mortgage show up on your credit report?

[IBroke]

Does a non reaffirm mortgage show up on your credit report?

It shows up as "IIB" and "$0 Balance" - but future payments probably won't be reported.

[tobee43]

In response to. . .

"so let me have my moment of appreciation for your efforts...please. because i DO understand your devotion."

I do appreciate your comments and thank you whole heartily. But I must admit that it is my boss who has the drive. I just work here. He handled a particular case that started in 1994, went to the 9th Cir. twice and then up to the USSC where he won a reversal of the 9th Cir ruling (we did have special counsel for that part of the case). It took 15 years including additional litigation once it was remanded back down the chain to the bk ct, but he finally got paid, not from the client, from the other side. Never asked a dime from the client.

Des.

des... please...one cannot work for and with someone unless they have at least a bit of their mind set. you would not likely have been hired!! LOL.

and it must be nice to work with someone that actually has principles!! so, it just rubbed off on you bit! LOL!! take the compliment! that and dime will not even buy you a cup of coffee, but it might get you into Heaven!

[justbroke]

Moving itself would cost us $10K and there is no 3,800 sqft.-home on the market for less.

I'll sell you my 3,800sqft home for $500K. It's very nice in a very nice neighborhood. It would be a short sale though.

Anyhow, with regards to the never reaffirm... I absolutely see NO reason to reaffirm on a home! In Florida, and the 11th Circuit (Georgia, Florida, Alabama), there is NO ride-through with cars and such, so you must reaffirm them if you want to keep them. However, this is not always enforced, as it is really up to the creditor to complain.

There was one judge in Texas -- and several others across the Districts -- that always tells debtors, at reaffirmation hearings, that he is "doing them a favor" and "denying your reaffirmation". He does it in all cases.

[blockhead]

To wnguyen, in response to:

Some jurisdictions have flat out held that so long as you are current and, based upon state law, if you fail to reaffirm there is nothing the lender can do. This may be the situation in your jurisdiction hence the reason your attny said you do not have to reaffirm.

In my jurisdiction state law does not help, but some of the judges are now warning creditors that they will have to answer to the court if they repo solely because the debtor did not reaffirm. I do not think the judge can really do anything but. . .

That is exactly what my attorney said, that in some states, state law prohibits a finding of default due to bankrupty and failure to reaffirm, by a note holder on real estate property as long as the note is paid up to date. In a different thread I can't find though, Des, you said there was also a part of the bk law itself that prevented acceleration for up to date notes and you mentioned some clause relating to existing contracts?

I ask as someone here asked me if I could remember the clause and I couldn't.

Thanks for all your assistance to people here.

[IBroke]

I'll sell you my 3,800sqft home for $500K. It's very nice in a very nice neighborhood. It would be a short sale though..

OK, the balance would be lower - but be advised that we need financing on the entire $500K - oh, and we wouldn't make any payments on $420K of said balance for the next 27 years...

Well, the reaffirmation-question is not going to come up anyway since it will be a CH 13..

[despritfreya]

That is exactly what my attorney said, that in some states, state law prohibits a finding of default due to bankrupty and failure to reaffirm, by a note holder on real estate property as long as the note is paid up to date. In a different thread I can't find though, Des, you said there was also a part of the bk law itself that prevented acceleration for up to date notes and you mentioned some clause relating to existing contracts? I ask as someone here asked me if I could remember the clause and I couldn't

Look at the inter-play between the following Code provisions:

1. 362(h) - the stay is lifted if an individual fails to reaffirm or redeem personal (not real) property,

2. 524(a)(3) - the discharge acts as an injunction for the collection or enforcement of a debt as it relates to personal liability.

3. 524( c) - excepts from the discharge, debt that is properly reaffirmed.

4. 524(d) - requires the Court to advise a pro se debtor that a reaffirmation agreement is not required under bk law or non-bk law. Similar disclosures are required of debtor’s counsel.

As a result, the only “requirement” to reaffirm relates to the lifting of the stay and the ability of a creditor to repo the personal property if a reaff is not signed. That does not necessarily mean a lender will repo especially if payments are current. But the creditor, unless non-bk law prohibits it or the bk judge thumbs his nose at the Code, has the right to repo and this right only relates to personal property.

As it relates to the “acceleration” of the note such is unenforceable under several provision.

1. 362(a)(6) as it relates to any action to collect, assess or recover a pre petition claim as well as other provisions under 362(a).

2. 365(b)(2) as it relates to executory contracts/unexpired leases (subject to the rejection provisions.)

3. 524(a) as it relates to the effect of the discharge injunction since an acceleration is an attempt to collect.

4. 524(f) which authorizes voluntary payments to a creditor.


Hope this clarifies.

Des.

[wnguyen]

To wnguyen, in response to:

“Does it mean a debtor has to reaffirm his/her vehicle because the Code requires? My case specifically, my lawyer said there was no need to reaffirm (disregard the paperwork sent by the lender) because they won't take the car if the loan is current.”

11 USC §521(a)(6) states “in a case under chapter 7. . .in which the debtor is an individual (the debtor) shall not retain possession of personal property (like a car) as to which a creditor has an allowed claim for the purchase price (not a refinance or a title loan type debt) secured. . . by an interest in such personal property unless the debtor, not later than 45 days after the first meeting of creditors. . . either (A) enters into an agreement with the creditor pursuant to 524( C) (reaffirmation agreement). . . or (B) redeems such property from the security interest pursuant to section 722. If the debtor fails to act within the 45-day period. . . the stay. . . is terminated. . .

So based upon 521(a)(6) you must reaffirm or redeem and if you do not, the creditor is free to take action. HOWEVER,

Some jurisdictions have flat out held that so long as you are current and, based upon state law, if you fail to reaffirm there is nothing the lender can do. This may be the situation in your jurisdiction hence the reason your attny said you do not have to reaffirm.

In my jurisdiction state law does not help, but some of the judges are now warning creditors that they will have to answer to the court if they repo solely because the debtor did not reaffirm. I do not think the judge can really do anything but. . .

To tyson24, in response to:

“I was looking at my petition before I sign it, and notice there is no surrender or reaffirm checked in the statement of Intention for either my residential home or my rental property. My residence is current but my rental property is unpaid for 2 years but not yet in foreclosure. (Chase bank) If I do not surrender (in MN) will I have to pay the foreclosure fees if I do not surrender the home? Am I better to surrender it?”

The Code requires a Chapter 7 debtor (individual) to submit a Statement of Intention. If you did not it was most likely an oversight and should be corrected. While the Statement of Intentions may say you are retaining, so long as you do not sign a reaff it does not matter. Keeping or surrendering does not change the effect of a discharge. What does change the effect of the discharge is the signing of an official Reaffirmation Agreement and not rescinding it within the time period allowed. If, in your case, you stop making payments and do not sign a reaff you have effectively surrendered. But. . . please remember that if there is an HOA you must pay all assessments/fees that fall due from your filing date until the mortgage company forecloses.

Des.

Thanks Des for clearing it out.

[ladycee]

Hi Des and Blockhead:

That is exactly what my attorney said, that in some states, state law prohibits a finding of default due to bankrupty and failure to reaffirm, by a note holder on real estate property as long as the note is paid up to date. In a different thread I can't find though, Des, you said there was also a part of the bk law itself that prevented acceleration for up to date notes and you mentioned some clause relating to existing contracts? I ask as someone here asked me if I could remember the clause and I couldn't

Just need to ask: What is "acceleraton for up to date notes"?

thanks for a really informative thread all,

Chris

[justbroke]

Sorry when this seems to be a dumb question - but I'm not too familiar with the court-system. So does this decision have a direct influence to CH 13 filings in the Florida Middle District?.

Actually, in Florida, a different set of caselaw seems to apply. I can't find the cases at the moment, but several judges in the Middle District opined that the intent of the FRBP (federal rules of bankruptcy procedure) and the Title 11 bankruptcy code, wanted cases to flow quickly. If an individual didn't know the status of a lien strip until 5-6 months into the case, then that would be a bad thing. Especially since the resources used to prosecute the case would be utilized, only to find out that after the lien strip is granted, that the debt limit was exceeded once the debt becomes unsecured.

At least that's how the majority of Judges in the Middle District have ruled. The Middle District (MD) was basically the counter to the 9th Circuit. The MD opined that the debt limits should be looked at from the schedules only. That the judge could go beyond the schedules if necessary. However, anything that did not have an immediate liquidation value or needed to be determined through a hearing or through litigation, did not count towards the 109(e) debt limits.

[tobee43]

Actually, in Florida, a different set of caselaw seems to apply. I can't find the cases at the moment, but several judges in the Middle District opined that the intent of the FRBP (federal rules of bankruptcy procedure) and the Title 11 bankruptcy code, wanted cases to flow quickly. If an individual didn't know the status of a lien strip until 5-6 months into the case, then that would be a bad thing. Especially since the resources used to prosecute the case would be utilized, only to find out that after the lien strip is granted, that the debt limit was exceeded once the debt becomes unsecured.

At least that's how the majority of Judges in the Middle District have ruled. The Middle District (MD) was basically the counter to the 9th Circuit. The MD opined that the debt limits should be looked at from the schedules only. That the judge could go beyond the schedules if necessary. However, anything that did not have an immediate liquidation value or needed to be determined through a hearing or through litigation, did not count towards the 109(e) debt limits.

jb....the middle district of florida is most likely one of the most confusing in country....as i know you know....in that district is how many counties???....and each of those counties have different formulas in calulating the final sums in either your means test or procedure.

and how is it they can find out after and not before?? it's so nuts.

the middle district (MD) was basically the counter to the 9th circuit covers where exactly?.... is it, or does it cover the entire scope of lake, orange counties...etc. all having different criterial for filing. wow....