Chapt. 7, Mortage reaffirm

[Rico07]

Hi,

I am new to the forum and am hoping for some real help. We are currently going through a HAMP mod. due to loss of income. We have been in a trial for 6 months and though we are being reported current a loan mod still puts you in default of your original contract. We already have permanent documents filed, investors have yet to sign which I am told should happen this month.

We are considering filing chapt. 7 since we have overwhelming debt and a collection suit pending. We live in Michigan.

My question is loaded and it's about the tricky reaffirmation thing. We are troubled about it. Our home like so many here, is under water. However, with our now poor credit and circumstances, we still could not get into a home for what we have here and for what we are paying. We are absolutely certain we want to stay.

We have been advised not to reaffirm and walk. 1) If we do reaffirm despite warning, can we still lose our house?

2) Can a lender decide not to reaffirm and still foreclose upon our filing BK?

3) If the lender agrees could a judge deny it because it is not in our best interests and then we still lose our house?

I guess before filing I want 100% assurance we will not lose our home. I do not want to put it at risk and timing is likely important too because the mod is still pending.

4)If we don't reaffirm would we then risk losing the collateral even if we are current? I'm not sure you can even ride through in Michigan anymore.

We have no equity and ours would be a no asset case. THANKS in advance for expert help.

[researchnerd]

I'm not an expert but I can answer a few of your questions:

1) If we do reaffirm despite warning, can we still lose our house?
Yes, if you miss payments they can still foreclose. And, if you are underwater, they can come after you for the negative equity. Reaffirming makes it so that your house is no longer protected by the BK -- it protects the lender, not you.

2) Can a lender decide not to reaffirm and still foreclose upon our filing BK?
If you are current, I am pretty sure they can't foreclose just because you filed BK.

3) If the lender agrees could a judge deny it because it is not in our best interests and then we still lose our house?
It's not so much the judge as the bankruptcy trustee. If the trustee determines that, based on your income and expenses, you can't afford your home, he or she may not confirm your BK case. That does not cause foreclosure but it means you won't get the BK.

I guess before filing I want 100% assurance we will not lose our home. I do not want to put it at risk and timing is likely important too because the mod is still pending.
There is no 100% guarantee, it all depends on the situation.

4)If we don't reaffirm would we then risk losing the collateral even if we are current? I'm not sure you can even ride through in Michigan anymore.
In some places they cannot foreclose if you are current on payments...but I believe that in other places they can, if there's no reaffirmation. Your attorney will be able to tell you what the risk is in your jurisdiction.

If you have been advised to walk away, I would strongly recommend considering it -- especially since you have no equity, you have nothing to lose. It may take 10 years or more for the housing market to come back, so your home will not become a good investment until that happens, and if something devastating happens (such as a major illness) it can become a liability.

I know this is incredibly difficult to think about. We walked away from our beloved home this past spring, and it still hurts. It helps to think about your situation over the long term. If you get a BK discharge on your other debts, can you still afford your mortgage payments and realistic maintenance costs...and still afford to have a life? Have you looked at/priced rental homes in your area? Is there a compelling reason (logic, not emotion) you need to stay in that particular house? You don't have to answer these here, just some things to consider.

[Sweetpea3829]

Ok...I was firmly in the reaffirm camp until very recently...lol.

If you are allowed to "pay and stay" in your jurisdiction than do so without reaffirming. Trust me. It leaves a door open to you that you would not otherwise have open.

In our situation, we lost a multifamily in 2007 but kept the multifamily we lived in. We didn't know about reaffirmation (the attorney never mentioned it) and found out in 2009 that our on-time payments were not being reported and the loan was actually discharged. We set out to reaffirm.

A year later, the reaffirmation is still in process and we now are looking at our 100K underwater pain in the rear multifamily home and thinking that it makes absolutely no sense for us to keep the place. We're hoping the lender will modify the loan via interest reduction and/or (preferably and) principal reduction.

If not...we still have the option to stay for as long as it takes them to foreclose and get us out...save during that period of time and maybe even buy a nicer home with the money we're able to save.

Good luck with your decisions...you'll get through it...tomorrow will come and the next day after that will come and suddenly they'll start getting sunnier. :-)

[HHM]

Don't reaffirm unless it is absolutely, positively mandatory.

For real estate, pay and stay is very much alive.

However, you run into problems with personal property (like cars) where the ability to pay and keep is not as certain.

[Rico07]

I want to personally thank each of you for your detailed and helpful responses. We still have not made a decision as to whether or not we will file BK but it looks like with our income even settlement is out of the question so we do not have much choice. If I am not mistaken I think here in Michigan we have to reaffirm to stay. Fear of the unknown, as we have no intention of leaving our home. I am stuck on the what if's and I am not willing to risk our house. Best to all of you, I certainly am looking forward to "sunnier" days. It has literally been one of the darkest times in our life. I am sure you can relate.

JET