Can you modify a mortgage that was discharged in bankruptcy?

[jencz]

Hello all,

I know this may be a dumb question (and I am pretty sure the answer is no) but was curious~

Can you modfiy a mortgage after it was discharged in a chapter 7?

The reason I ask is we did include our primary property in our bankruptcy, with the advice of our attorney and were told as long as we stay current with our payments we could still keep the house.

Since then I have lost my job and though we are still current, am considering all options, which may include possible modification to try and reduce our payment (things are tighter now with my loss of income and we do want to keep the house). Though I am not sure if this is even an option.

Does anyone know for sure?

Thank you!!

[justbroke]

I just don't see how you can modify -- or why any lender would modify -- an unenforceable contract. Also, there is caselaw which prevails that post-discharge re-affirmations are also unenforceable (if they were never noticed by the Court prior to discharge).

Other than simply, there's no enforceable contracts as against the person (in personam), creditors need to be careful about actually creating what amounts to a post-discharge reaffirmation (by having you sign some agreement). This would violate the discharge injunction, unless the agreement was "new" and had new consideration.

Personally, I haven't read about anyone ever getting a post-discharge modification on a mortgage loan that they discharged in their Chapter 7.

Rather than take my word for it, as I've written in several (BKForum) threads on this same topic... let's look to this attorney.

The mortgage lender attorney explained that his client, the mortgage company, can not or will not modify a mortgage when the borrower is not personally liable to pay the mortgage. In other words, why would the lender want to extend their own risk on a defaulting loan and offer better mortgage terms to a borrower who has eliminated their own personal risk?

Jonathan Alper, Bankruptcy Attorney
http://www.bankruptcyorlando.com/200...7-debtors.html

Having wrote all that... why not try to work with the lender? I don't see nothing wrong with asking for a Modification, but the key is... modify what? You may find, and I don't know that personally, many closed doors and may not be able to get the right answers. You may get the "the loan is discharged, you don't own anything" routine. But, alas, you never know... and it won't hurt to try.

[jencz]

Thanks Justbroke, that is what I thought, I just wasn't sure if the bank could draft a "new contract/agreement" but now I know they can't.

I will just continue to try and keep my payments current and communicate with my lender if I can't.

Thanks again.

[justbroke]

Thanks Justbroke, that is what I thought, I just wasn't sure if the bank could draft a "new contract/agreement" but now I know they can't.

Keywords... "new" and "contract". If it's a totally new Mortgage & Note, and they record it as well, I don't see any issue with that.

My only question was what does this do for the Bank if it's not a "new contract". Without a "new contract" (mortgage/note), they have nothing to hold you to. So it wouldn't be in their interest to just modify your note.

If you are able to get a post-discharge modification of a discharged mortgage debt, please let us know! Many of us would be interested... especially the Chapter 7 folks who discharged the debt.

[Martha13]

Hi jencz,

I will post this, however, it's still unclear as we haven't officially acted on it yet. But I will post our experience as it unfolds, if it will help anyone. We are in the process of BEGINNING a modification on our house (thru the Obama MHA program) that was discharged in our bk 7 in 10/08. We had actually chosen to "let it go", had not made any payments on it since April or so of last year, and had moved into a rental. We were awaiting the final notice of sale when suddenly the NOD itself was cancelled, and when we contacted the lender, they offered the mod to us. We spoke in DETAIL about the fact that it was a discharged debt, and that technically, we would still have no liability for it. I believe I asked the lender "let's say my husband is hit by a truck, and I can no longer pay the mortgage" what will happen? We also have a 2nd that won't be modified, the lien will apparently just "sit there" until we attempted to actually re-fi, if even possible, or sell, wayyy in the future. We are doing this simply because down deep we want to keep the house (forever!) and could not see any way in the future of coming up w/$$ for another, etc. A year ago it was a business decision, this one's a bit more personal. The upside for us if everything goes as planned, we have a mortgage payment for 5 years that is less than rent, the upside for the lender is that we are paying on that mortgage, keeping it out of f/c, and really the only downside for the lender I can see is that if we fail then in the future they will have to begin the f/c process all over again.

[justbroke]

Martha13, excellent! Yes, please keep us posted. It would be nice to have all the detail of an actual post-discharge modification! Could help many others. It seems, in your case, that this was unsolicited (you didn't ask for it).

I actually think this is going on with my rental as I surrendered it, and they'll still trying to "help" me keep it. LOL

[ShorterSN]

I'll be watching this thread with interest. We haven't missed a payment yet, but included our home in our Ch7 BK. We expect to start missing payments soon. Wells Fargo has refused to even discuss changing anything, and the only programs they have in place are for those who are already well behind We're sure we can't stay long without paying, but it's good news to hear that some banks are trying to work with people.

[jencz]

Just an FYI~ I applied for a modification through the Hope program about a week ago and received an email from them saying they had contacted Chase/WAMU and I do qualify. They instructed me to continue on the Chase website to fill out the application requirements.

I spoke with Chase today (I called regarding another matter) and the lady asked me why I had applied for a modification, I explained to her I had lost my job, etc. She told me to fill out the application again (I had filled one out previously, without Hope, before I lost my job) and to fax it in. I did ask about the BK and including the home and she said it did not matter (????)
I am still skeptical, but will follow through with the application.

I wanted to share this with those of you thinking of doing the same that when I applied for a modification previously (without Hope) I never heard anything from WAMU/Chase. When I called they told me it was not in the system yet and could take 40-60 days.

Now, through Hope, it is in Chase's system immediately.

I will continue to keep you all posted.

[LookingFrwrd]

We did get a modification on our 1st mortgage with Countrywide following a Ch 7 discharge with no reaffirmation.

We were in the process of a modification with CW when we filed BK in early 2008. The mod was subsequently put on hold until our discharge in June although it was hardly worth the effort since they did not freeze our interest rate or lower our payment. The only thing they did for us was allow us to roll in missed payments to catch us up.

Anyway, there is a bankruptcy addendum to the modification that states 1 - we were discharged in a Ch 7 bankruptcy, 2 - we reasonably expect to have the ability to make the payments specified in the loan modification and 3 - the modification was entered into consensually and does not affect the discharge of Borrower's personal liability on the Note.

Our monthly statements from Countrywide continue to be "for informational purposes only" with the bankruptcy disclaimer about the debt being discharged, not trying to collect on a debt, blah blah blah.

Hopefully this information will help!

[justbroke]

We did get a modification on our 1st mortgage with Countrywide following a Ch 7 discharge with no reaffirmation.

Excellent! This is nice to hear.

[gophermn]

I am sort of in the same boat with the rest. My primary homestead was IIB but no reaffirmation was signed. Basically and according to the BK petition, I am keeping my house out of good faith and making pymts ontime.
I also applied for the Make Home Affordable through the Obama plan to HomeComings and still waiting for their call. Paperwork was filed April 09. My interest is hovering around 9.25% for one mortgage. Now you see why I need to get these pymts down. A friend said they did a refi 2yrs ago on their home 1yr out of BK CH7. I thought the golden rule was 2yrs. If I am still making payments "out of good faith" am I excluded?

Anyway, still waiting on the Obama plan and Homecomings to get back to me. I need to lower this 9.25% interest rate as its killing us!!!

[Lajazz947]

Hello all,

I know this may be a dumb question (and I am pretty sure the answer is no) but was curious~

Can you modfiy a mortgage after it was discharged in a chapter 7?

The reason I ask is we did include our primary property in our bankruptcy, with the advice of our attorney and were told as long as we stay current with our payments we could still keep the house.

Since then I have lost my job and though we are still current, am considering all options, which may include possible modification to try and reduce our payment (things are tighter now with my loss of income and we do want to keep the house). Though I am not sure if this is even an option.

Does anyone know for sure?

Thank you!!

I spoke to Wachovia yesterday and I asked them how they could modify a loan that was discharged if they did not allow reaffirmation.

She said that they DO modify loans and that all the discharge does is take it out of the BK department and place it into the loss mitigation department.

She said that they will need 6 months of paystubs and bank statements to verify income.

She said that they do not report to the credit agencies but that we can refer to them later on if we buy another property or need confirmation of payments.

She said not to worry about being behind in payments unless you get 4 months back. She also said to feel free to call them anytime to check on the status of the BK as they have a special system ( I assume PACER ) that tells them what is going on.

I really appreaciated the information and this has now been confirmed by two people at Wachovia so I have to assume it is correct.

[justbroke]

I'm glad to hear this. It seams that the Banks are dealing with the potential of looking like a "post-discharge reaffirmation" by including language in the Modification that the debt is indeed discharged and that you're not reaffirming. The post-discharge modification turning into a "reaffirmation" is what I was worried about and what is not allowed (the "reaffirmation" part).

This can be very useful!

[tazzy20176]

I just received an approval for a loan mod with Bank of America (formerly Countrywide). The only thing that's mentioned in the offer is that it is contingent upon Bank of America receiving a relief from the automatic stay. So I'm confused, it doesn't say that I'm not liable for the mortgage and why would they need a relief from stay if I was discharged back in March? I'm just hesitant to sign this loan mod and be held liable again. I'm still upside down, but my payment is the same as most of the rentals in my area. Any advice would be appreciated.

[justplaintired]

Very interesting. We are good on our first mortgage, very low interest rate, 5.25 in good standing. Our second is the problem. It actually in all honesty had us probably owing more then what we could sell our house for. It is down to 22,000 at 7.25. The payment on this is what hurts us. Wonder what our chances are with the second? Will they do a loan modification on a second mortgage? I mean before the economy took a dump we were probably about even with what we owed and what the property is worth, now who knows?

We are current on both mortgages, but honestly if we thought we could do something about the second that would be the real relief we need. DH just got cut back to 32 hrs again! We are never going to get ahead with his job doing this off and on and who knows when it will stop.

I have never talked to the second mortgage due to the fact we are current. We want to keep our house, so we wouldn't want anything to put us in jeopardy of losing it. Wonder how you can find out what your options are. I have read they most likely won't come after us for the second since the 1 st mortgage is so much more then the second. Now my mind is racing, wondering what we should do.