Can the lender up my interest rate?

[bakergrl]

We switched our second mortgage over to a credit union in order to have it at one set rate and not one that is variable. When it came time to refinance with them (i think every 5 years) they told us that since our house was under water it may be best to not have it refinanced and reappraised but instead let it readjust itself each year to what the prime interest rate is which for us was around 5%.

So now that we have filed bankruptcy and have not reaffirmed what is going to happen when it hits in a couple months to readjust itself, can they do something shady and give us a really bad interest rate?

Sorry if this does not make a lot of sense I don't get some of how the mortgages work.

[SMinGA]

If you have an adjustable rate mortgage, the discharge will not change that. So yes, they can adjust the rate according to the terms of your loan. Which are probably based on the prime rate somehow. (Your CU can't change the prime rate out of spite.)