Stay & pay

[IBroke]

In these cases, the Judge compels you to either follow through on your stated intent or to redeem or surrender the property.

You also list the proverbial Catch-22 where the Judge knows that it's not in your best interest to reaffirm -- perhaps because it's non-recourse anyhow. I'm not sure I've ever seen one of these.

Thanks, justbroke!

Looking at the current real-estate situation, the mentioned Catch-22 - especially in the 11th district and Florida which was hit very hard - could possible be an issue one day. I guess only time will tell how these cases would be handled.

[justbroke]

A judge could also deny the debtors intend to sign a reaffirmation. How would/could that play out? I mean, a judge can't compel you to reaffirm AND not reaffirm the same time, right? Or would that mean that the judge could also compel you to surrender in that case before granting the discharge?

In these cases, the Judge compels you to either follow through on your stated intent or to redeem or surrender the property.

You also list the proverbial Catch-22 where the Judge knows that it's not in your best interest to reaffirm -- perhaps because it's non-recourse anyhow. I'm not sure I've ever seen one of these.

[IBroke]

Yes. From the Florida cases that I have read, including In Re Linderman, that the lender/creditor asks the court to compel. This almost always occurs post discharge. However, if you read In Re Linderman, you'll see a distinction where the debtor listed an intention to reaffirm. In some other cases, like In Re Linderman, the debtor didn't list an intention, but I think it's the same issue.

The fallback position, of the ankle-biting creditor in In Re Linderman, was that without reaffirming or redeeming, the debtor had no choice but to surrender and that the court should compel the debtor to do so.

(Another interesting tidbit from In Re Linderman, is that the Judge had the Clerk hold the discharge for an additional 60 days to make sure that the debtor complied.)

justbroke, I was just thinking about a scenario where a judge would consider a reaffirmation not to be in the debtor's financial interest - let's say the mortgae is either totally unsecured or underwater by a few $100Ks. A judge could also deny the debtors intend to sign a reaffirmation. How would/could that play out? I mean, a judge can't compel you to reaffirm AND not reaffirm the same time, right? Or would that mean that the judge could also compel you to surrender in that case before granting the discharge?

[IBroke]

They would ask the court to Compel you to honor your stated intention or surrender.

Thank you so much! That makes perfect sense. That would also explain that some people had a problem when they didn't indicate ANY intention on their petition since you can't compel to something you never indicated to intended. And it seems that in regards to the indicated intentions "stay & pay" and "reaffirm" might be treated as intention to "reaffirm" when it comes to court compel.

[justbroke]

The reason I asked was the word "abandon". We would indicate "reaffirm" and NOT "surrender" so even if the unlikely happens and the lender asks to compel, they would be asking the court that we would do what we previously indicated on the petition (reaffirm), right?

They would ask the court to Compel you to honor your stated intention or surrender. The order to compel abandonment would essentially mean that you are forced to move out. It's "like" an eviction, but it isn't an eviction.

(Eviction is the worse thing you ever want in your credit record! Also note that "rental" records are not kept in the general reporting database, so your credit report doesn't show these. However, Equifax is at least one company that maintains such information. Most evictions, though, end up in the public record anyhow as a court judgment. A motion to compel wouldn't show up as a separate court judgment unless you failed to abandon (quit/vacate) and the lender then sought remedy in the local courts, for a writ of replevin.)

[IBroke]

FYI, a Chapter 20 to cure arrears on the second mortgage is the only thing that would work. You cannot use a Chapter 20 to lien-strip a second mortgage in the 11th Circuit (Florida, Georgia, Alabama).
In Florida, the order granting the lien strip has very specific language that requires a discharge to be granted in order for the lien strip to stick.

Oh, thanks, I'm learning a lot today! Filing CH13 right away is not an option because my mother is way above the unsecured debt limit. So the plan is CH7 and settle the 2nd after discharge for a release of lien. If that doesn't work either, we would have to sit out the couple of years to be able to obtain a CH13 discharge again. The 11th District truely su**s big time. The current home-value at zillow is listed at about $280K (but it's a bit higher in reality due to some upgrades), the balance of the 2nd is $150K and the balance of the 1st after our HAMP-mod is $560K. I think that makes a foreclosure initiated by the second very unlikely.

Contempt could only come if they went back to the Judge and asked for a Motion to Compel and you failed to follow the court's order, ordering you to abandon the property. I wouldn't worry about the "contempt" part. If you have a major lender/creditor, they are very very unlikely to ask the court to Compel you to redeem, reaffirm, or surrender.

The reason I asked was the word "abandon". We would indicate "reaffirm" and NOT "surrender" so even if the unlikely happens and the lender asks to compel, they would be asking the court that we would do what we previously indicated on the petition (reaffirm), right?

[justbroke]

So "stay & pay" is still the way to go by indicating "reaffirm" but not signing. I guess the same applies to the 2nd mortgage. On that one, we are past-due but it's totally unsecured. I'm not concerned about foreclosure on that mortgage and as a safety-net, we would still have the "Chapter 20"-option.

FYI, a Chapter 20 to cure arrears on the second mortgage is the only thing that would work. You cannot use a Chapter 20 to lien-strip a second mortgage in the 11th Circuit (Florida, Georgia, Alabama).

In Florida, the order granting the lien strip has very specific language that requires a discharge to be granted in order for the lien strip to stick.

But that only applies if my indicated intention on the petition would have been "surrender", right? If I indicated "reaffirm" and would sign such an agreement at that time, I wouldn't be in contempt, correct?

Contempt could only come if they went back to the Judge and asked for a Motion to Compel and you failed to follow the court's order, ordering you to abandon the property. I wouldn't worry about the "contempt" part. If you have a major lender/creditor, they are very very unlikely to ask the court to Compel you to redeem, reaffirm, or surrender.

[IBroke]

Fact, even after the lender wins a Motion to Compel turnover, you still actually have to then default. However, with the Order granting the lender's motion to compel, you would be in contempt of an order if you don't vacate the property.

But that only applies if my indicated intention on the petition would have been "surrender", right? If I indicated "reaffirm" and would sign such an agreement at that time, I wouldn't be in contempt, correct?

[IBroke]

On my petition I indicated "reaffirm" for my first mortgage and "stay and pay" on my second mortgage. I did not reaffirm my first mortgage because my Bank told me that I didn't need to reaffirm for the "modification" to stick! Best of both worlds!

Thanks!

So "stay & pay" is still the way to go by indicating "reaffirm" but not signing. I guess the same applies to the 2nd mortgage. On that one, we are past-due but it's totally unsecured. I'm not concerned about foreclosure on that mortgage and as a safety-net, we would still have the "Chapter 20"-option.

[justbroke]

So in other words, if we indicate the intention to "reaffirm" or "stay & pay" BUT don't sign a reaffirmation pre-discharge, the lender can't simply foreclose when we are current AND would be willing to sign a reaffirmation once we would be "forced" by the lender to do so after discharge.

Maybe this helps...

Fact, a lender in most States cannot foreclose upon your real property if you are current. This is regardless of whether you have filed bankruptcy or have indicated that you would surrender the real property.

Fact, the lender would need to go back to the Court and file a Motion to Compel in order to get the debtor to follow through on their intention. The court doesn't compel suo sponte (on it's own accord) in these matters. The credito must assert some right.

Fact, even after the lender wins a Motion to Compel turnover, you still actually have to then default. However, with the Order granting the lender's motion to compel, you would be in contempt of an order if you don't vacate the property. Once you have vacated the property, the lender can usually exercise their right that's enumerated in the Mortgage (or Deed of Trust) with respect to vacated property. That is, they can secure the property. If it is abandoned and depending on underlying State non-bankruptcy law, they can then pursue an actual foreclosure. IN some cases, based on the same State non-bankruptcy law, the lender may have to wait for you to abandon and then wait the statutory period (usually 90 days) before accelerating the note and actually suing for foreclosure.

I haven't seen one of these cases from end to end yet, so what I write is an intersection of what I have studied in the Bankruptcy cases and the Foreclosure cases in Florida.

On my petition I indicated "reaffirm" for my first mortgage and "stay and pay" on my second mortgage. I did not reaffirm my first mortgage because my Bank told me that I didn't need to reaffirm for the "modification" to stick! Best of both worlds!

[IBroke]

Yes. From the Florida cases that I have read, including In Re Linderman, that the lender/creditor asks the court to compel. This almost always occurs post discharge. However, if you read In Re Linderman, you'll see a distinction where the debtor listed an intention to reaffirm. In some other cases, like In Re Linderman, the debtor didn't list an intention, but I think it's the same issue.

The fallback position, of the ankle-biting creditor in In Re Linderman, was that without reaffirming or redeeming, the debtor had no choice but to surrender and that the court should compel the debtor to do so.

(Another interesting tidbit from In Re Linderman, is that the Judge had the Clerk hold the discharge for an additional 60 days to make sure that the debtor complied.)

So in other words, if we indicate the intention to "reaffirm" or "stay & pay" BUT don't sign a reaffirmation pre-discharge, the lender can't simply foreclose when we are current AND would be willing to sign a reaffirmation once we would be "forced" by the lender to do so after discharge.

That would work with me as long as our house is not in jeopardy at any time and we keep the "last word" if we want to keep the house or not. Although we owe FAR more than what the house is worth, the low monthly payment is something the lender could be unhappy about once the values go up again. They already tried to cancel our modification once and lost at court. The high balance is the reason why a "stay & pay" would be great but due to our low payment, we would rather reaffirm than lose the house.

So what would you suggest in regards to the statement of intentions? Indicating "reaffirm" (without actually reaffirming pre-discharge) or what you did, "stay & pay" (I didn't know that was an option at all)? Would the chosen intention "reaffirm" be "safer" in case the lender forces you to compel? And what if the attorney/judge/trustee would object to a reaffirmation because THEY believe it's not in your best financial interest? Can you lose your home in that case ALTHOUGH the non-existence of a reaffirmation wouldn't be your fault?

Sorry for all the questions, but I'm just trying to figure out the smartest move once my mother files for BK.

[justbroke]

And if you have the "luck" to deal with such a "biter", can you still reaffirm then (as debee suggested)?

Yes. From the Florida cases that I have read, including In Re Linderman, that the lender/creditor asks the court to compel. This almost always occurs post discharge. However, if you read In Re Linderman, you'll see a distinction where the debtor listed an intention to reaffirm. In some other cases, like In Re Linderman, the debtor didn't list an intention, but I think it's the same issue.

The fallback position, of the ankle-biting creditor in In Re Linderman, was that without reaffirming or redeeming, the debtor had no choice but to surrender and that the court should compel the debtor to do so.

(Another interesting tidbit from In Re Linderman, is that the Judge had the Clerk hold the discharge for an additional 60 days to make sure that the debtor complied.)

[IBroke]

Yes, and this tends to be the case. However, and I will repeat it because it's worth repeating, only the ankle biters seem to care.

Thanks!

And if you have the "luck" to deal with such a "biter", can you still reaffirm then (as debee suggested)?

[justbroke]

Let's say we will be doing what you did - indicate "stay & pay" on our statement of intentions. The lender doesn't oppose it while the case is still open. The case gets discharged and closed.

Can the lender still oppose the "stay & pay" after the discharge and re-open the case ALTHOUGH you actually did what you indicated on your statement of intentions?

Yes, and this tends to be the case. However, and I will repeat it because it's worth repeating, only the ankle biters seem to care.

[IBroke]

The whole stay and pay "option" is still the way to go even if you are in Florida (or the 11th Circuit).

Let's say we will be doing what you did - indicate "stay & pay" on our statement of intentions. The lender doesn't oppose it while the case is still open. The case gets discharged and closed.

Can the lender still oppose the "stay & pay" after the discharge and re-open the case ALTHOUGH you actually did what you indicated on your statement of intentions?