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

[annb]

i did not refirm on my car was not late on any payments and they have repoedd my car is this egal

my lawyer said not to reaffirm so i did not car was repoed call the lawyer explained to them i did what they said they did work to get my car back said the new law is you now have to reaffirm on cars i was not behind at all so the bank gave me back my car and i will sign a reffirm to keep it

[IBroke]

Thanks again!

So it really is a State-issue and the sole existence of an ipso-facto doesn't necessarily mean it can be enforced.
That's actually what I suspected. The statement the other member made ("if there is such a clause, they can forcelose") appeared a bit too general to me. Turns out that was true.

Thanks again, justbroke!

[justbroke]

The ipso-facto clause argument goes both ways and there are people who will point to recent decisions. Noting that the recent decisions were really big banks and one had to do with default credit swaps and billions of dollars.

For personal property, it's pretty much settled that the code actually lists "personal property" in 11 USC 521 as you needing to actually redeem or reaffirm and if not, then the lender can pursue repossession under the ipso-facto clause.

For real property, you will always need to look to your State underlying non-bankruptcy law. Foreclosures are a State issue, not a bankruptcy court issue. Almost everything related to how to deal with property, in a Bankruptcy, is a combination of the State laws and the federal laws. I guess I'm saying that the answer is not so simple as are "ipso-facto" clauses enforceable, because the real answer is... it depends -- on the State. I know that in Florida, creditors have needed to go back to the Bankruptcy Court to force "abandonment" on properties where the debtor has stayed and paid.

I have not read one case yet where there is a mortgage, that a person who stayed and paid consistently, on-time, with no issues with property taxes or hazard insurance, were foreclosed upon.

[IBroke]

This is an intersection of State non-bankruptcy law and bankruptcy law. In most States, the only way to be in default of a mortgage agreement, is to actually be in material default. Filing of bankruptcy is not material default. In those same States, the only way for a lender to sue for foreclosure in order to have the property sold through auction, is for the borrower to actually not pay the promissory note as agreed upon.

In other words, you can't foreclose on someone just because they filed bankruptcy. The person would actually needed to have stopped payments or didn't provide for other things listed int he Mortgage (security instrument). Those other things are typically things such as having hazard insurance and keeping the property taxes paid. This is why, in Florida -- for example, the little ankle biting banks (credit unions) go back to the Bankruptcy court to force a person to "abandon" the property, so the bank can file a foreclosure lawsuit under the part of the Mortgage agreement regarding "abandonment".

So, you're in Florida, and unless you have some sort of Credit Union, then you need not worry about this at all.

Thanks, justbroke!

I was curious because on a different forum (myfico.com), somebody else mentioned that if your mortgage has a clause that puts you into default due to the BK-filing, they could even foreclose on you although you're current.
I did some research on the internet and found out that such clauses would be unenforceable IF you indicate that you intend to reaffirm AND actually do "all you can" to actually reaffirm, meaning you either reaffirm or have the judge/attorney deny your reaffirmation. Otherwise, it was stated that these "ipso-clauses" would really be enforceable.

So the question is - how does this play out in real life?

In the credit-union cases, we already figured out that in order to be foreclosed on, the bank would go back to the BK-court to force you to either abandon or, if you really want to stay, reaffirm. So you would still have a chance to actually reaffirm before they could force you to abandon.

But what happens to these "ipso clauses"? If it is indeed true that they are enforceable if you don't reaffirm, what would the legal steps be? Would you be in default after discharge (if at all) and could you cure that possible default by reaffirming after discharge just like you would in the CU-cases? Or are these clauses simply void?

I'm not even sure that we have such a clause in our mortgage but I'd love to provide some input to the other thread.

[justbroke]

i did not refirm on my car was not late on any payments and they have repoedd my car is this egal

Absolutely legal. For "personal property", of which a car is, you MUST reaffirm, redeem or surrender. There is no "ride through" and if you hired an attorney, the attorney should have explained that to you. Now yes, it's up to the lender to enforce this and typically it's only a few major lender who repossess even if you're current (Ford is one of them).

If you filed pro se, then I'm sorry you learned this fact the hard way.

[justbroke]

This is an intersection of State non-bankruptcy law and bankruptcy law. In most States, the only way to be in default of a mortgage agreement, is to actually be in material default. Filing of bankruptcy is not material default. In those same States, the only way for a lender to sue for foreclosure in order to have the property sold through auction, is for the borrower to actually not pay the promissory note as agreed upon.

In other words, you can't foreclose on someone just because they filed bankruptcy. The person would actually needed to have stopped payments or didn't provide for other things listed int he Mortgage (security instrument). Those other things are typically things such as having hazard insurance and keeping the property taxes paid. This is why, in Florida -- for example, the little ankle biting banks (credit unions) go back to the Bankruptcy court to force a person to "abandon" the property, so the bank can file a foreclosure lawsuit under the part of the Mortgage agreement regarding "abandonment".

So, you're in Florida, and unless you have some sort of Credit Union, then you need not worry about this at all.

[IBroke]

What I'm curious about now are these "ipso clauses" in many mortgages which trigger a default on your mortgage in case you file for BK.

I found some info that these clauses itself are unenforceable but ONLY if you actually reaffirm your mortgage.

Could anybody please enlighten me on that?

[Clabbergirl]

I believe it is - you were doing a 'retain and pay' kind of thing? You keep current on your payments, they let you drive the car without issue? My lawyer said usually they don't repo the car, but they always have that right until the debt is paid and I have the title.

[annb]

i did not refirm on my car was not late on any payments and they have repoedd my car is this egal

[cw99]

We were actually just accepted into the HAMP program for our mortgage, and with the loan modification through that, Wells Fargo still said that they were not sending us a reaffirmation agreement to sign and that all we needed to do was complete the 3 month "trial" phase and our mortgage would then automatically process for the lowered rates (adjustable to a max of 5% after 8 years).

[SteveGreen]

As I general rule, DO NOT SIGN MORTGAGE REAFF'S. BUT!!! If you mortgage company is going to do a loan modification with an interest rate and payment you can afford and you want to keep your home then you should strongly reconsider my general rule.

[kmmom]

In California - we just got our Chapter 7 discharged - did not reaffirm the house. Chase would not work with us anyway. We just moved. Now what - contacted CHASE - dimwits - did not tell them we have left - regardless - do they not have to follow the procedure of foreclosure? Also - on our credit report - it states we did not reaffirm - when the property forecloses - does it again go on our credit report as a foreclosure when clearly the bankruptcy info states that we did not reaffirm?

Thank you for any help.

[ashleywatson]

Reaffirming a mortgage after a bankruptcy is completed and the filer receives his or her discharge is not authorized by the bankruptcy code. if service approaches you after your discharge and asks you to refinance your mortgage, this may be a violation of your bankruptcy discharge. For this you must consult with your BK lawyers.

[tls]

I was planning to reaffirm my mortgage, but after reading through this forum (what a great resource!), I understand I don't have to and probably shouldn't. I live in Illinois and I want to keep my house. That said, here's the issue: My tax records say my home is worth 90,000. My first mortgage is current. I owe about 65,000 on it and have it financed through a bank. It has been over a month since my 341 and I had not heard anything regarding a reaffirmation, so I started thinking the bank just didn't want to. Well, today I got papers from my attorney telling me to immediately sign and send back so they can be filed before the discharge date. My interest rate is not great at 7.%, but I can live with it.

My second mortgage is about 23,000 at (I think) 12% to Citimortgage. I am not going to reaffirm this one for sure. I am a couple of months behind on this one--I was hoping to modify it. The way this one is set up is kind of like revolving credit--it's strange. Anyhow, I would like to get a low interest on this loan and set it up like a 'regular' mortgage, not like a revolving account or whatever it is that Citi does--if I could do that, I may reaffirm if that's what it takes to seal the deal. I can afford to make the payments; I'd just like to get a fair deal. I told my attorney right off the bat when I filed that I wanted to modify the mortgage(s). I thought he would go to bat for me, but he basically said you can't do that in a 7.

So, my question(s) is (are), does anyone have experience with Citimortgage modifying their mortgages? And should I just be content with the 7% on the first mortgage or try to get a better deal? AND, when would I do that? Since my attorney won't fight for a modification and the banks can't talk to me, what are my choices? Not to beat it to death, but please clarify/confirm for me: the banks have to go thru the same process to foreclose with or without the reaffirmation, and in the same manner as if you had never filed for bk. If you stay current--no problem, the home is yours to sell, remodel, whatever. Not that I plan to, but if I would miss a payment, the bank would treat it the same way they would if I had never filed bk (which I think would mean they send a late notice, you catch it up, all is well). Some posters have me sort of scared that without that reaff, miss one payment and your house can be taken in a matter of days. I just think that if the bank wouldn't foreclose for one missed payment before the bk, they wouldn't foreclose for one missed payment after the bk. Thanks for any help!

[shadowb]

Des, thank you, thank you. You have this girl smiling once again! When the sheriff called me today it was somewhat out of the blue. I knew it was a matter of time. My real concern in addition to us being in a recourse state was the whole deal where my slimy ex signed over his interest in the house and property to me. My divorce attorney at the time kept saying it was "a gift", but I knew how badly upside down the house was. My ex has done nothing in the divorce unless it benefitted him. My divorce attorney found out months later how right I was once I started getting more correspondence from the mortgage company. When I filed the chapter 7, it was mostly because my ex had created a lot of debt inclusive of the house being SO upside down and at the time (and to this day), nobody really knew where he was. He also owes the IRS a lot of money (this is being paid through his chapter 13 thank God). Through the year of my divorce he would show up on designated court days, but then he would disappear. Weeks after I received my divorce papers, I started getting late notices and collection stuff from various companies, including utilities that I thought he had been paying. It turned out he was 3 months behind on everything. He wasn't paying his child support as ordered, he wasn't supporting the boys and I as verbally agreed on between the attorneys (he was to pay the house note in lieu of being assesed spousal support), and wouldn't provide medical insurance for us. I ended up having to apply for assistance, go on food stamps and applied for Medicaid. The chapter 7 was such a godsend! When the judge in the chapter 13 court saw how destitute I was thanks to my ex, in court he asked for any BK attorneys present to talk to me outside the court room to discuss with me my options. That was how I met my chapter 7 BK attorney. He held my hand and walked me through it, every step of the way. It ended up providing me with much needed relief and the time to be able to take a deep breath and try to move forward.