Reaffirmation questions

[InSeriousDebt77]

So the consensus appears to be that as long as you remain current on your mortgage, not reaffirming will not cause you to lose your home post discharge. The part that I still don't get though is that since reaffirming would in the best interest of the creditor/lender, why do some lenders more or less decline to enter into an agreement? Seems to me they would jump at the chance, especially if the debtor is offering

[seanf12]

That's my big question as well....

[Cali]

Then I would listen to you lawyer. Failure to reaffirm does not effect disposable income calculation.

This is good to know. I thought it would effect your income.

[justplaintired]

So by reading many threads, whether you reaffirm or not, as long as you stay current on your mortgage payments, both 1st and 2nd mortgage you are safe to assume they will not foreclose?
I have been reading many threads on here and all seem to agree, reaffirm or not, being current is the most important thing on a mortgage if your intentions are to keep the home. We told our attorney we wanted to reaffirm, he left us feeling this was a bad idea, but after reading on here, I understand what he is saying. I checked online to see what the recommended mortgage payment is based on your income and we are under that amount by about $75 a month, so this should make our mortgage payment ok, atleast that's what I am guessing. Probably way over thinking so of this stuff, but I just want to be prepared.

[HHM]

So by reading many threads, whether you reaffirm or not, as long as you stay current on your mortgage payments, both 1st and 2nd mortgage you are safe to assume they will not foreclose?
I have been reading many threads on here and all seem to agree, reaffirm or not, being current is the most important thing on a mortgage if your intentions are to keep the home. We told our attorney we wanted to reaffirm, he left us feeling this was a bad idea, but after reading on here, I understand what he is saying. I checked online to see what the recommended mortgage payment is based on your income and we are under that amount by about $75 a month, so this should make our mortgage payment ok, atleast that's what I am guessing. Probably way over thinking so of this stuff, but I just want to be prepared.

If you play the law averages, then yes, so long as you are current and stay current, the lenders will "probably not" foreclose. But, there is some risk to not reaffirming.

[oldrocker]

We are actually rightside up on both mortgage and truck. About $30000 up on house ($37000 exemption), 4th year on fixed 30yr mortgage and about $4000 up on truck, two and ahalf yrs into 6yr 0% loan. Haven't seen lawyer yet (next week) but it seems to me reaffirming these might worth the piece of mind, since we are so far up on them?

[HHM]

We are actually rightside up on both mortgage and truck. About $30000 up on house ($37000 exemption), 4th year on fixed 30yr mortgage and about $4000 up on truck, two and ahalf yrs into 6yr 0% loan. Haven't seen lawyer yet (next week) but it seems to me reaffirming these might worth the piece of mind, since we are so far up on them?

If the lenders push for it, then perhaps it wouldn't be too bad. I think reaffirming a truck on a 0% note in which you have positive equity is probably worth it.

Ultimately though, the decision to reaffirm needs to be made based on your future ability to pay. If your job is stable and if getting out from under your unsecured debt would net you "surplus" income, then a reaffirmation agreement may not be bad. But as I posted above, use the opportunity to reaffirm as a way to make the deal better somehow.

The key point is to determine if you would have surplus income after your unsecured debt is discharged such that you can start saving...if you won't have that surplus (at least 5-10% of your gross monthly income), I would probably not reaffirm because your financial situation would still be a little too perilous coming out of BK.

[seanf12]

So by not reaffirming, lenders have the "legal right" to foreclose on your property if they so desire, and even if you are current, but in all likelihood they won't. Is this something that may vary state-to-state (with state foreclosure laws)?

Thanks

[justplaintired]

Well if we can we will definitely reaffirm our home. We want to, we have always felt our home was the greatest potential we ever have to have a good net worth. We want to keep it, pay on it and someday, leave it to our kids! LOL They can sell it and maybe have a little money to spend for things they want, that's why we have never paid late, never done anything to give our mortgage co reason to worry about our payments being on time.

So, I guess we should push for reaffirmation, when we reach this point, I know this forum will help me figure out what to do to make that happen. Right now we have maybe $1000 in equity if that much, but our 2nd mortgage is due to pay off in 12 years, now I know that's a long time, but once it's paid off, we will have about $50000 in equity in our home. That's alot of money to us. So it's well worth working our butts off to keep this house. Before we retire if things go well, we will own this house outright, that's always been our plan. CC just got us off on the wrong direction. Now we are working our way back to living how we planned all along.

[HHM]

So by not reaffirming, lenders have the "legal right" to foreclose on your property if they so desire, and even if you are current, but in all likelihood they won't. Is this something that may vary state-to-state (with state foreclosure laws)?

Thanks

The best answer is, the issue is unclear.

The problem is this...(1) it is difficult to research, because if a debtor tried to defend the foreclosure (out side of the BK), that would happen at a very low level state court so there would probably not be a published opinion, and the likelihood of an appeal (because of cost, is low). So the fact is, we just don't know if lenders are even trying to foreclose based solely on the fact that a debtor failed to reaffirm, once the BK was discharged. BK attorney's are not going to really know because they would not be the ones involved in the lower court action. But, foreclosures based on non-reaffirmation just don't seem to be happening on any wide scale basis. Anecdotally, if there were significant foreclosures where the sole ground was failure to reaffirm, we would probably hear more about.

The legal letter of the law (in the BK code) is that the debtor MUST either reaffirm, surrender, or redeem. The initial consensus was that if a debtor did none of those, the bank could foreclose. I am not convinced that, once the BK is discharged, the lender still has the right to foreclose based solely on the lack of reaffirmation, but at the same time, I don't have a well researched 20 page legal brief to back that up.

What we do have is the practical experience of attorney's across the nation. Ride-throughs are alive and well. Lender's will continue to accept payment and appear to only foreclose or repo when there is an actual loss or significant risk of loss (as evidenced by a missed payment).

On a side note, the new law passed just as the mortgage crisis was getting underway, it would have be interesting to see if lenders would exercise their foreclosure rights for non-reaffirmation in a "hot" real estate market.

If the issue ever gets litigated, I think courts will probably put some sort of cut-off on the right to foreclose based on the debtors failure to reaffirm. My hope is, they would put the cut-off at discharge. But I doubt the cut off would be much longer than that. The failure to reaffirm happened at a specific point in time (during the BK), a year down the road, when the debtor has made on time payments, the argument gets a little thin that suddenly the secured asset is now, all of sudden, in jeopardy necessitating foreclosure.

I would characterize it like this...is their a risk, yes...is it a significant enough risk such that you should reaffirm "based" solely on that risk, no. Again, the decision to reaffirm should be made based on your financial condition and not the risk of loss of the secured property.

[justplaintired]

Thanks again HHM, Very interesting. The house does not cause a hardship on us, the cc did. Living within our means, like we did for the 1st couple years in this house before cc hell, we did fine. So thanks again, and if we can we will reaffirm. Crossing our fingers we can. Somehow that would make me feel more secure. And do I understand correctly, reaffirmation, means they report our payments to the credit bureaus and if we do not reaffirm they don't? Just curious on that.

[seanf12]

Same here, I would rather reaffirm for the peace of mind. Problem is though we are showing negative on the schedule I & J, so I am not sure a judge would approve the agreement.

[HHM]

I would rather reaffirm for the peace of mind.

To each his own, but maybe I didn't make my point clear enough, I am actually recommending that you DO NOT reaffirm just for peace of mind

reaffirmation, means they report our payments to the credit bureaus and if we do not reaffirm they don't?

Unfortunately, that is absolutely not true. Unless the reaffirmation agreement actually "says" the lender will report payment history, the lenders typically do not change the reporting of the loan based on the reaffirmation. Again, this is one of those issues that is controversial, and is probably being litigated somewhere. But, even if you reaffirm, your credit report usually still reflects the loan as IIB (Included in bankruptcy) and payments are not being reported. Members of this forum, and elsewhere, are having mixed results disputing the way reaffirmed loans are being reported.

If you have an attorney, I would listen to your attorney. They are in a better position to evaluate how things are handled in your district. The fact of the matter is, MOST debtors DO NOT reaffirm and thus far, there have been few reported negative consequences.

[justplaintired]

I misunderstood then, so reaffirming is not a good idea, that's our attorneys opinion too. Sorry, I think I am overthinking again. We best listen to our attorney, afterall, that's why we hired him. Again, thanks for the info. I have never been good at reading legal papers, it's very foreign to me. That's whats so great about this forum.

Now if I could get my mind to quit worrying about every little thing that would be great! I just can't wait til this is behind us, I think BK 24/7 now. It's driving me nuts! LOL

[seanf12]

Same here, this BK has consumed my life LOL

Still scares me though....the thought of losing our home would be devastating to our family. But as you say, our attorney also recommended we not reaffirm. I am still going to bug her again today and get her thoughts on the risk involved

For what it is worth, I posted a couple of questions on a couple of those sites where lawyers respind to your question, and both have said that their is no risk in losing your home if you don't reaffirm, as long as you remain current. Crossing my fingers they are right, but who knows