Mortgage Reaffirmation - is my lawyer bungling up

[Pizza]

Is my lawyer bungling up one of the most important aspects of my Ch.7 filing?

If you followed TRfromIllinois' threads, you can see how the 'retain and pay' option can get ugly. Well my attorney, even after agreeing that it probably wasn't in my best interest to reaffirm, even after agreeing that retain & pay is an option, he is wanting to put 'reaffirm' on my papers! I thought he had already filed, thank goodness I have a few days to review the info until he does.

When I told him we weren't going to reaffirm, he told me that stay and pay is an informal option, and unless we're surrendering we should put 'reaffirm' on the petition even if we plan on not signing the agreement.

Really? It sounds like lying to the court to me:

I declare under penalty of perjury that the above indicates my intention as to any property of my estate escuring a debt and/or personal property subject to an unexpired lease.

Ummm... I don't like this at all. I have expressed adamantly that I have no intention of reaffirming the mortgage. In fact, I wanted to surrender until I discovered 'stay and pay' as an option.

So what does all this mean? Am I committing perjury by doing as he advised? I had a lot of confidence in this attorney up to this point.

I realize that signing is voluntary, but stating under oath that I am planning to sign doesn't sound right at all.

[Pizza]

May I add, we have until Friday to review and sign everything. Then he plans to file that morning.

We don't want to reaffirm the mortgage! The house is old. Updating it would cost far more than its equity. It's poorly constructed in some aspects and is probably waiting on termites.

But all that said, if we could stay and pay that would be far better than surrendering. We just want the option to leave if something awful happens - say, a $10,000 estimate for something that must be done quick!

[Pizza]

EDIT: Lawyer just called back. Is changing statement of intentions to 'other' and 'retain and pay'

Feel free to kill the thread.

[TRfromillino]

Do you have my lawyer? lol Seriously tho, if you don't want the house, do the retain and pay and see how it plays out. It could very well work for you. My lawyer was just to lazy to contend the ipso facto clause and I have different circumstances than you do. Hang in there!

[Pizza]

Thanks TR!

I think the lawyer just got confused on how to fill the paperwork out for the informal 'stay and pay' option. There is just no way to make this option cut and dry.

[bcohen]

Really? It sounds like lying to the court to me:

"I declare under penalty of perjury that the above indicates my intention as to any property of my estate securing a debt and/or personal property subject to an unexpired lease."

I realize that signing is voluntary, but stating under oath that I am planning to sign doesn't sound right at all.

The Statement of Intention is just that--your intention on the day that you filed. You are free to change your mind later, and in states where auto lenders are permitted to repo on a non-reaffirmed loan--even if the payments are kept current, people commonly check the box for "reaffirm" but then refuse to sign the reaffirmation agreement (or ask the judge to deny it) thus doing a "stay and pay". (I realize that your question is about a mortgage, and no state allows a mortgage lender to foreclose even while the payments are kept current, simply because the debt is discharged in bankruptcy.)

[LadyInTheRed]

Yes, it is very common to check reaffirm and then not reaffirm. Checking that box does not obligate you to reaffirm.

[Pizza]

Yes, it is very common to check reaffirm and then not reaffirm. Checking that box does not obligate you to reaffirm.

That's my understanding as well. It's the separate, signed form that states our intention "under penalty of perjury". So if our intention all along was not to reaffirm, we must put that, correct? As my wife put it, we're not going to prison over a checkbox!

[LadyInTheRed]

That's my understanding as well. It's the separate, signed form that states our intention "under penalty of perjury". So if our intention all along was not to reaffirm, we must put that, correct? As my wife put it, we're not going to prison over a checkbox!

If I filed a Chap 7, I'd talk myself into the idea of reaffirming if the lender will agree to reduce principal. A reaffirmation agreement is subject to negotiation. The creditor is getting the benefit of the reafirmation of a debt that would otherwise be discharged, so it is reasonable to negotiate for concessions from the creditor. You only have to intend to reafirm for a moment. You might try to negotiate terms with the creditor, you might find out that what your attorney will charge to negotiate the reaffirmation agreement is more than you want to pay, or you might just change your mind. In any case, an "intent" is a state of mind that is hard to disprove. I think it is your district attorney who would have to decide to prosecute you for perjury. The DA really doesn't care about your little BK case.

ETA: If you told your attorney that you wouldn't sign the statement of intention with the "reafirmation" box checked because you don't want to perjurer yourself, he very well may have changed it to "other" because he can't advise you to commit perjury.

[TRfromillino]

I was convinced that I did not want to reaffirm my mortgage. Everything pointed to ----> stay and pay. And I didn't reaffirm at the 341 even tho I had marked it. Then the bank decided to play ball and filed a motion to lift the stay because I triggered the ipso facto clause by filing. My lawyer, bless his heart, didn't have the energy to protest the enforcibility of this clause. So after weighing the pros and cons, I decided to grudgingly reaffirm. I requested that they send me my current statement when I made my payment the other day because I have this little icky feeling that they (the bank) is tacking on their lawyer fees onto it. I want to see this before my discharge in June cuz I might change my mind if they are.

[bcohen]

I was advised by several attorneys that ipso facto clauses are illegal with regard to bankruptcy, and that the law explicitly prohibits their enforcement when the debtor (or rental tenant) files for bankruptcy. Remember that it is the bankruptcy judge--not the bank's attorney--who ultimately decides if the stay can be lifted. Also, I know of no state where a mortgage lender can choose to foreclose rather than continue to accept payments, assuming that the loan is not in arrears.

[TRfromillino]

These were my thoughts also bcohen, but I had no one to back me up. I feel like I know, the bank knows and my lawyer knows it also. However, this isn't my thread and most likely Pizza will be just fine.

[Pizza]

There is a LOT of conflicting info out there about reaffirmations. I've been reading all morning.

Among them, variations of:

1. 'It's possible the lender could foreclose, but in my xxx years of practice, I have never seen a lender foreclose on someone who was current...'
2. 'A lender might not foreclosure while the home is underwater, but may choose to wait a few years for the equity to go up'
3. 'Never ever re-affirm. Period'
4. 'If you don't re-affirm, prepare to surrender the property'.
5. 'In 2005, Stay and pay was eliminated for vehicles, but not real estate'



Wonder why the water is so muddy? Either way, reaffirming or not, the decision seems....risky. I wish there was some actual law published somewhere that I could track down explaining the concept of 'stay and pay'.

I can tell you that the lender would not come out ahead by foreclosing, just as I would get screwed by reaffirming. The house is old (1939). It would cost probably ~$40,000 to make the home up to code and the structure sound, and at least another ~$15,000 to modernize the kitchen and bathrooms. Getting central air and heat (that worked normally by today's standards) might be impossible. And the neighborhood isn't great - can't do anything about that. No one would ever be able to sell at $135,000. The average home here goes for somewhere in the $50,000 - $70,000 range.

Maybe if they sold as-is again, someone would give $55,000 for it, but we owe $77,000.

I don't see any winners either way.

[Pizza]

Here's hoping that a picture is worth a thousand words:



That is a flat roof that covers about 1000 sq ft of my house! The upstairs bedroom meets the roof in this corner you see there.

Flat roofs leak. A lot. We were able to get the insurance company to re-roof it in 2009, but I wouldn't count on pulling that off again. Est. life maxes out at about 10 years. If and when it leaks again - $8,000 to replace flat with another flat, or possibly $500 to patch the spot ourselves. This corner is probably already eaten up pretty good with water damage.

A roofer said he wouldn't even touch the project (as far as providing a slope) for less than $15,000. Which of course we don't have. This doesn't count trying to match asbestos siding that should be replaced (for $20,000 or so - whole house).

Anyway - the point of all of this is to explain why my situation may be a little unique - as to why I feel 'stay and pay' is the way to go. It's a 4 bedroom house, perfect for our family in shape and size for about $800 a month - but is NOT an investment property and is unlikely to find another buyer due to things like this (which we, stupidly, should have caught when we bought the house in our early 20s). Basically I want to gamble that nothing bad happens here, because that is a possibility - BUT if the wrong joist rots and the upstairs starts to fall through the downstairs ceiling, we are SCREWED! We could never afford to fix that. Sounds like a reaffirmation could be easily considered an 'undue hardship' in light of this.

Any thoughts?

[keepsmiling]

My thoughts are... you obviously know what the correct answer is.
Don't reaffirm. Period.
I promise you won't go to jail over changing your mind