Want to Stay and Pay but my court has different rules?!

[SierraJude]

I'm in Georgia.

So I'm filing Chapter 7 and have been planning to NOT reaffirm my mortgage and stay-and-pay. Met with the paralegal yesterday, and she told me that last year the court decided that if a debtor doesn't reaffirm, the bank can foreclose for any reason and at any time--even if the debtor doesn't miss any payments.

She is going to have the lawyer contact me to explain further, but he hasn't yet.

How can the court just decide that? Shouldn't I have all of the rights that the law affords me?

[justbroke]

A bank can't foreclose at "any time" and for any reason. It's a little complex but maybe summarizing it the way the paralegal did summarize, is the better way. In the Eleventh Circuit Court of Appeals (11th Circuit), a ruling has stated that a debtor MUST redeem, reaffirm or surrender real property. Whether or not a lender will pursue forcing a debtor to surrender is anyone's guess (and it does happen at times). The bottom line is that there is no guarantee. The seminal case was actually back in 1993 and I think it was Taylor (I didn't look it up).

The only time it has become an issue, from what I personally have experienced and have seen in Florida, is with smaller "local" banks and credit unions. I call them ankle-biters. I have not witnessed the larger banks running back into the court and crying foul (although it may happen). The problem is that on the State non-bankruptcy level, there has to be an actual breach of the contract (not the "ipso facto" default on filing bankruptcy). That breach is typically a failure to pay. If you abandon the home (surrender it), then that is typically cause for foreclosure. So these ankle-biters, err, credit unions have gone back to the bankruptcy court and cried foul that the debtor did not "surrender" the home so that the CU could foreclose.

What these rulings really mean is that the debtor cannot defend a foreclosure lawsuit. The creditors in these cases will win the foreclosure by default summary judgement.

[SierraJude]

Yes! That is exactly what she was talking about. She even mentioned the 11th circuit. Googling this issue actually brought me to the Taylor case here: https://casetext.com/case/in-re-taylor-51

So if I want to stay and pay, would my paperwork state "surrender?"

[justbroke]

I can't advise you on what to put on your Statement of Intentions. Some have checked "surrender" but also put a comment of "stay and pay" in the comment box. Whether or not your particular bank will run back to the bankruptcy court to get a foreclosure is anyone's guess. If your bank is an ankle-biter then that latter will likely happen. If your mortgage is with a large lender, they just like you to stay and pay.

The real issue for the bank is that you will have discharged the debt and you could then sit there and defend a foreclosure while not paying for months or years (true in Florida!). I have not had this issue and I discharged my mortgage debt. I was with Bank of America.

[bcohen]

Why not just put "reaffirm" but then not follow through on the reaffirmation?

[justbroke]

Why not just put "reaffirm" but then not follow through on the reaffirmation?

At least in the 11th Circuit (Georgia, Alabama & Florida) the bank can still come back after you don't reaffirm and force the redeem, reaffirm or surrender. For Florida and in my experience this has not been a problem except with small ankle-biting banks.

But I do agree. A person in this situation "really" wants to reaffirm the debt while discharging the promise to pay. Putting reaffirm and not following through because you later "change" your mind may work. (May work provided that there are no ankle-biting banks that want a real follow-through on the intention.)

[SierraJude]

I fully intend to continue to pay, and if we ever leave, I will sell the house as normal. I'm concerned about something happening to prevent me from doing this and then being on the hook for all that debt without being able to pay or declare bankruptcy again.

I'll definitely be discussing this with my lawyer.

Is PennyMac a small or big bank?

[leonel9]

PennyMac is a larger lender.

[SierraJude]

So if my lender doesn't force a choice, do I just leave that section where I'm supposed to choose blank?

[justbroke]

Your attorney may say that you must select something.