keeping house in ch7..no reaf agmt

[mysticspirit25]

My MIL filed chapter 7 no asset, she is upside down in the house (but only by about 5k) she wants to keep the house and noted such in her "notice of intent" to reaffirm the debt in her bk7 papers. Her mother pays the mortgage and she is sole heir when her mom passes away and will get enough money to pay off the home (she has maybe 2-3 years max left), in any case...the bk is in NC. I helped her with most of the paperwork.

The court sent a notice that all debts which debtor is seeking reaffirm on, need to be approved by the court except real estate or debts secured by real estate.

My question is..obviously she wont have to file a reaff with the court, but what if she decides to walk away in a year (maybe mom might cut her off..who knows what could happen)...if she never signs a formal reaff. agreement, is the debt considered discharged, even though she said she "intended to reaffirm" in the BK7 paperwork. She intends to pay and keep current...but what if.....is it technically discharged should she walk away from the house?

[B65]

if she does

not sign a reaffirmation, she can walk away from that loan on that house anytime in future and not owe a penny to anyone. It was listed in her bankruptcy, it is therefore bankruptcy protected for the life of the loan, she is not responsible for that debt at all, she can either keep paying on time and keep the house or walk away whenever she wants even in years to come.

B

[AngelinaCatHub]

Mystycspirtit, Is this house in your name only? You stated your Mother is paying it? If it is in your name, your Mother is either paying you rent (income), or a loan that could be construed as “preferential”.

No I would not reaffirm as this could bite you in the back-side. Mom is contributing to your income or expenses. Be advised to seek this answer with your lawyer. I got nailed for preferential and/or insider payment. ‘Hub

OK, I stand corrected as I was not sure what MIL was and I shall assume Mother-in-law. "nevermind". 'Hub

[mysticspirit25]

I have nothing to do with the home, I just helped my Mother In Law with her forms, she is pro se. My MIL's mom is paying her mortgage, but the loan itself is in MIL's name, but home is in MIL's and her husband's name. I was merely asking b/c she called me asking about reaff...and I told her not to prepare one b/c NC bk law specifically states loans secured by real estate do not need reaff, even if they could cause undue hardship.

[TEW]

It'd best not to reaff just MHO

[BnkrptcyLwyr]

It'd best not to reaff just MHO

I tell people to NEVER sign a reaff on a home (and especially at this point). There's no point. The banks want you to stay in the home and keep paying. And despite the technicality that you should sign the reaff ... I have yet to have a client tell me that the bank foreclosed because they didn't sign the reaff agreement.

Funny thing ... I had a creditors attorney actually say to me "you know they can foreclose?!" ... and I thought ... "yeah, I'm sure your client will really do that." Wrong! Hasn't happened yet where the client was maintaining payments.

The ONLY issue is that if you don't sign the reaff there MAY be a problem with trying to refinance later with that same bank ... they'll give you grief about not signing the reaff.

But, the overwhelming advantage is that you can always walk away at any point in the future with no worries of any kind of deficiency judgment ... and at sheriffs sales (if you end up in foreclosure) banks are now bidding less than what is owed on the first mortgage and this can mean a huge deficiency judgment if you sign that reaff and then can't make the payments.

I want my clients to be able to walk away at any time.