Reaffirmation glitch?

[Rico07]

We filed Chapter 7 and are awaiting discharge. We live in Michigan and were advised to reaffirm or surrender. We have two mortgages. We opted to reaffirm and retain the property.

We plan to stay here and could not live anywhere else as well for what we pay here. The first lender sent the reaffirmation. It is signed and filed with the court. The 2nd stated they would not be reaffirming because of the loan to value ratio. We are upside down. I know it is not mandatory but technically the ride through is not an option.

I am concerned. Can we still stay and pay on the 2nd in this situation? We want to keep our home. They have accepted our payments while in chapter 7. They would not stand to recover much if anything on our house. Most would go to the 1st lender. I am really stressed about this and hopefully they do not want our property. Please help my attorney's appear to be on Thanksgiving break. Sorry I posted this twice. I am not sure I posted in the right place the first time. Thanks in advance.

[wnguyen]

Did you read this thread yet? I think it's very useful. --> http://www.bkforum.com/showthread.ph...-very-bad-idea.

[tcreegan]

Hi Ricon,

If there is no equity past the first, the 2nd becomes essentially worthless and can be settled for pennies on the dollar. Once you are discharged and missed a few payments, contact them and offer to settle. Lots of folks around here have done that. Might want to remind them that foreclosed price is not appraised price, and then deduct cost of sale and see how much is left. If you reaffirm you lose all the leverage.

Don't want to cast aspersions on your attorney(s), but the advice seems to run counter to what most attorneys here post.

Hope it all works out for you,

Tom in Colo

[Rico07]

Thank you for your replies. We were told by two different attorneys here in Michigan that you basically need to reaffirm or surrender here. Obviously we are in the dark having never experienced a crisis of this magnitude. So, if we continued to pay the 2nd they would be happy, even though there is no reaffirmation? Our first has a terrific mod in place. The 2nd is only for a few months. Only a small portion of like 24,000 remains secured, the rest is lited in the schedules as unsecured. Being you post that reaffirmation is a bad idea, then we would be ok to stay and pay on the 2nd?

[DebtEnder]

I would have the reaffirm pulled back from the court. You can do this easy enough and ride thru on both if the 2nd is at least partly secured. I would never affirm the debt if there are two players and the house is upside down.

[tcreegan]

Hi again Rico,

So, if we continued to pay the 2nd they would be happy, even though there is no reaffirmation?

If there is no equity past the 1st, there is no point paying the 2nd, settle w/ them.

Tom in Colo

[Rico07]

I do not have any cash to offer them at this point. I was thinking settling would be a good idea but right now I have no bargaining chips. I wondered if I could just pay them for a few months and then offer a settlement once I gather the cash? If I did this, would I only offer a % on the secured portion listed in my BK schedules (24,000) or the entire amount I owed before BK (59,000)? What percentage is fair on a loan like this? Thanks for all your help.

[jeff722]

That is wild. I and wife just went through it and was discharged. Our lawyer told us that we would have to reaffirm or surrender the house. She said that is what most all people do that goes through their office. I brought it up several times about ride-thru. She said it is not done much anymore. I had no problem reaffirming. It is just interesting at the differences in opinion.

[Rico07]

So I am assuming you did not reaffirm?

The 2nd is taking our payments and the trustee has discharged himself with no presumption of abuse. I looks like we will ride through on the 2nd. I do not foresee an issue as we have always been current. I do not know how we will handle the temporary mod on a discharged mortgage once it expires. I am also curious as to when they would release their lien. The schedules state their secured portion is near 25k but we originally owed 59k before filing.
Is that now partially stripped off the payoff too? My attorneys will not answer. Probably because their job is done although I am not impressed with their silence.

[debee]

That is wild. I and wife just went through it and was discharged. Our lawyer told us that we would have to reaffirm or surrender the house. She said that is what most all people do that goes through their office. I brought it up several times about ride-thru. She said it is not done much anymore. I had no problem reaffirming. It is just interesting at the differences in opinion.

It's because you're in the 6th circuit. You and the OP both.

[dneil]

Thank you for your replies. We were told by two different attorneys here in Michigan that you basically need to reaffirm or surrender here. Obviously we are in the dark having never experienced a crisis of this magnitude. So, if we continued to pay the 2nd they would be happy, even though there is no reaffirmation? Our first has a terrific mod in place. The 2nd is only for a few months. Only a small portion of like 24,000 remains secured, the rest is lited in the schedules as unsecured. Being you post that reaffirmation is a bad idea, then we would be ok to stay and pay on the 2nd?

I am in Michigan (traverse city area) and I have an attorney who specializes in bankruptcy. It is all he does. He strongly strongly STRONGLY advised us NOT to reaffirm. Call different attorneys (I did) and ask them point blank how they feel about reaffirmations on mortgages. Be sure to only call attorneys who specialize in bankruptcy. I guarantee you will find that it is best NOT to reaffirm. Especially if you live in Michigan!

By the way... whether you reaffirm or not.... you pay on the mortgages, you keep your house. Reaffirm puts you back on the hook to be sued if you default after the bankruptcy. NOT reaffirming allows you an escape should something happen. If you do not reaffirm, they can not sue you if you foreclose. What part of Michigan are you in? Northern or Southern?

[dneil]

By the way... was it the attorneys who told you this or their paralegal? There is a big difference because my attorney's paralegal was all ready to get us to sign an affirmation when my attorney stepped in and said, "hold up... nope, you do not want to sign that! You can keep your house as long as you continue paying...." As long as you are paying your mortgages, they will NOT take your home.

[Rico07]

I am in the southern thumb area of Michigan. We were told by two different attorneys, not a paralegal. Being in the 6th circuit, would this affect the 2nd mortgage? We did reaffirm the first. The 2nd refused because of the LTV ratio. Should I be concerned about this? They are accepting my payments.

[Rico07]

By the way, I have had more help in this forum! Thank you all for replying to this thread. I so appreciate your input.

[tcreegan]

Hi Rico,

I am also curious as to when they would release their lien. The schedules state their secured portion is near 25k but we originally owed 59k before filing.
Is that now partially stripped off the payoff too?

59K minus 25K secured = 34K unsecured In theory, if you didn't reaffirm, the unsecured is discharged in the BK and the 25K secured survives as a lien on the property. Lender releases the lien when paid or in a settlement.

but right now I have no bargaining chips. I wondered if I could just pay them for a few months and then offer a settlement once I gather the cash? If I did this, would I only offer a % on the secured portion listed in my BK schedules (24,000) or the entire amount I owed before BK (59,000)? What percentage is fair on a loan like this?

Sure you have bargaining chips, since you didn't reaffirm, you don't have to pay them anything and since there is no equity past the 1st, they can't make any $$ by foreclosing. And since you don't have to pay them....don't. Throwing $$ at the 2nd isn't going to make them more inclined to settle. Quit paying and after discharge have your attorney contact them about settling. Save the $$ you would have spent on payments for a settlement. Posts I have seen on settling the 2nd are in the 5-10% range. In business negotiations, start low and have a ceiling price where you break off negotiations.

Good luck with this!

Tom in Colo