Reaffirming 1st & 2nd vs ride thru

[maddog2112]

It`s been 20 days since my 13 to 7 conversion 341. My first and second as well as car payment were all paid outside the 13 and current. I haven`t received anything in the mail about reaffirming the notes. I definately plan on reaffirming the vehicle to prevent any chance of repo, and planned on reaffirming both mortgages. I`m still thinking about it all. When you reaffirm 1st and 2nd mortgages, do you continue to pay the same interest rates with any late payment fees as before? Does riding thru change any interest rates and or late fees. Just doing the research. The 1st has a low 5.5% interest fixed, but the second is 9.9%. Thanks

[laurannm]

Ride-through does not affect your loan note or any of its terms. Some people though have used the reaffirm agreement as a way to negotiate better terms with their lender though.

Why are you planning to reaffirm? Read through the boards and you''ll see that 99% of the people and lawyers out there are against reaffirm agreements, as they offer nearly zero benefit to the debtor

[StartingOver08]

Even if you decided to reaffirm your first, please don't reaffirm the second. The second will want you to reaffirm because they are SOL without the reffirmation, but it is in your best interest to ride thru and not reaffirm.

[maddog2112]

Starting over, what do you mean that the 2nd would be sol? I`ve spent so much time and effort on the conversion that I`m just starting to learn about the advantages and dis advantages of reaffirming and all the ins and outs. Please excuse my lack of knowledge on the subject. I have wondered if I could negotiate with the 2nd on interest rate and or principle.

[StartingOver08]

I'm sorry, ...I was using slang...as in sh** out of luck.

If you do not reaffirm your first or second AND if you decide to keep your home, you can always pay on the first and the second if you so choose. If things get tough in the future you can walk away without being personally responsible for the mortgage because it was already included in your bankruptcy.

If for some reason you prefer to reaffirm, just reaffirm the first mortgage (but even this is risky). Don't reaffirm the second. There are others on this forum that were successfully discharged from a Ch 7 that kept their homes and kept paying on their first mortgage but DID NOT reaffirm the second. Once they were discharged they stopped paying the second mortgage and in several months were able to work out an agreement to pay off the second for pennies on the dollar. Look up the posts by Relief (in California) she gives some good details. Leave your options open for YOU. Do what is best for YOU, not the bank. Remember a reaffirmation attaches the debt back to you personally as if you never filed BK. So think long and hard before you reaffirm.

As to negotiating on interest rate or principal, if you do what Relief did you don't have to worry about either the rate or the principal!

[maddog2112]

Starting over thanks. Yea I got the SOL the first time LOL. I`ll keep doing the research. I know if your upside down, like alot of CA people are it would make sense to blow off the 2nd. My house`s value, at least for now is about equal to the 1st and 2nd combined. It would be great to get rid of the 2nd somehow. I`ll check out reliefs posts. Thanks a million!

[logansdad]

The following was taken from :

http://www.mn-bankruptcy.com/housecar.html

This is the same for me here is an interesting read:

CAN I KEEP MY HOUSE AND CAR?

Many clients are relieved to hear me advise, in most Chapter 7s and in many Chapter 13s as well, that if they can afford to do so, they should keep paying their home mortgage and car loan the same as if they were not in bankruptcy. I don't always advise this, but in many cases it's the best thing to do. This is because while the bankruptcy discharge may get rid of the debt, it does not get rid of the security interest which the auto loan company has in the car; and it does not get rid of the security interest which the mortgage lender has in the house. This means that unless they are owned free and clear, if you want to keep your car, eventually the loan must be paid; and if you want to keep the house, eventually the mortgage must be brought up to date. The filing of a Chapter 7 bankruptcy can result in a delay in foreclosure of a mortgage and in the repossession of a car. After such delay, however, the security must eventually be surrendered to the creditor if the debtor is not able to make payments.

In Chapter 7 bankruptcies auto lenders and mortgage companies have always wanted their debts reaffirmed. A reaffirmation agreement reinstates the debt as if the bankruptcy had never taken place. Previously before the 2005 law I tried to avoid these reaffirmation agreements as much as possible, because it was always better to just have a lien on the house or car without being personally on line for the debt. If for example the car was totaled in an accident and the insurance wouldn't cover the entire balance of the loan, the debtor who had not reaffirmed would not have to pay any more for a car that was gone.

Since the passage of the 2005 law, there is even more reason to not reaffirm. This is because the new law requires a certification, both by the lawyer and the debtor, that the payment of the reaffirmed debt will not create a hardship. The fact is that every financial expense creates a hardship in the life a debtor who qualifies for a Chapter 7; so that by definition it becomes nearly impossible for any Chapter 7 filer to do a reaffirmation without lying under oath.

In the Chapter 7 cases it is common for automobile lenders to insist that the filing of the Chapter 7 violates the loan contract; and that the debtor must either surrender the vehicle or reaffirm the debt. Since reaffirmation is practically impossible, this puts some debtors in a tight spot. I have heard of a few cases where the cars were actually repossessed when the debtors continued to make the payments without reaffirming. There are also cases where the lender has threatened to repossess, but hasn't done it as long as the payments were being made on time. What I've been trying to do is speak by phone with someone from the lender who can tell me what the policy is. If they insist on a reaffirmation, it might be time to surrender the car.

The mortgage companies of Chapter 7 debtors have also been pressuring for reaffirmation agreements. TCF is the only lender I know of which has actually started foreclosure because a debtor would not reaffirm, however. All other lenders, as far as I know, don't threaten of foreclosure as long as the payments continue to be made. In my opinion foreclosure effort by TCF for no other reason than refusal to reaffirm is in violation of the bankruptcy statute, but so far nobody I know has had the funds to challenge them on it.

When a bankruptcy is filed, some lenders will discontinue sending monthly statements and may also cut off access to the lender's web site. This is because they are under court order to leave the debtor alone. I suggest to debtors that they should make some extra copies of their monthly statement before we file the bankruptcy, so that if the statements stop coming in the mail, they still have everything they need to make the payment. No mortgage lender I know of has refused to accept a payment.

See my exemptions page for the exact amounts that you may claim for your homestead and automobile exemptions. In both cases, you are allowed to claim the equity you have, not the actual value of the car or house. In other words, the figure you use for claiming the exemption is the value minus the amount of the loan or mortgage. These exemptions protect the asset from the bankruptcy trustee, but they do not provide any protection from the automobile lender or the mortgage company. These lenders or mortgage companies have an ownership interest in your house or car. The bankruptcy does not change their ownership interest, and so such lenders have to be dealt with by at least continuing the payments if that is possible.

The rules are different in a Chapter 13 bankruptcy, but in my experience the debtors almost always get to keep their home and vehicle, as long as they can make the payments. In a situation under Chapter 13 where you are seriously behind in mortgage payments, the arrears can often be paid as part of the plan; but while this goes on, the current payments on the mortgage must usually be paid outside the plan. Car loans are similar. Work closely with your attorney on these issues. Some factors can change the situation entirely, such as when the security is worth less than the balance of the loan.

[logansdad]

I believe for me I will reaffirm the house it was the first place where my son came home from the hospital to, and grew up at he likes his room and backyard, and he as well as my wife are attached to it; it is a home not a house. For me family values outweigh $$ sometimes, I feel that I am walking away from enough debt and we still will need a place to live, with all the stress of the BK on those guys, moving would just add to it and I am not making them go through it, I will however not reaffirm my autos. The accident scenario makes sense too I had never thought about that...

[maddog2112]

Logans dad, Thank you for your input. I definately want to keep the house, thats a big reason I`ve put my family and me thru all this. I`m leaning towards reaffirming the 1st, but would like to get a better deal out of the 2nd if possible. I owe about 70k on the 2nd and since there was a couple of slightly late payments over the years, they somehow jacked up the interest rate ( even though it was fixed) until all late fees and interest could be brought up to date, which we have not been able to do yet. What was supposed to be 9%, at times has gone up as high as 14.9%. I don`t want to risk having the vehicle repoed, so I`m leaning towards reaffirming there as well. I`m still trying to develop my plan, so all input is welcomed. The 1st and 2nd add up to approximately what the total value of the house is, so I think that puts me at a slight negotiating disadvantage if I`m looking at this correctly.

[midnight]

I'm thinking of reaffirming the 1st too. I'm also waiting to hear about a loan mod so who knows what will happen with that (was told it should cancel it). As far as a 2nd, should you NOT reaffirm if only it's more than the value of the home? I'm in a situation where our 2 mortgages are actually less than the value of the home (we have maybe 5-8k in equity). The 2nd is also an interest only too.

[sirod345]

Had 341 meeting on Oct 23, got my reafirmation date, which is Dec 16, 2009, should be discharged on Dec 21, do anyone think this will affect my discharge date

[OhioFiler]

I believe for me I will reaffirm the house it was the first place where my son came home from the hospital to, and grew up at he likes his room and backyard, and he as well as my wife are attached to it; it is a home not a house. For me family values outweigh $$ sometimes, I feel that I am walking away from enough debt and we still will need a place to live, with all the stress of the BK on those guys, moving would just add to it and I am not making them go through it, I will however not reaffirm my autos. The accident scenario makes sense too I had never thought about that...

Sentimentality is not the best reason to affirm a debt. Doing a ride through on your mortgage and keeping the payments current will allow you all the warm feelings you need to provide your family a home. Reaffirming a mortgage and then having no relief available via the bankruptcy court should my financial situation take a turn for the worse would be a risk I'd prefer to avoid. Given our current economy, the state of the housing market and the number of clowns operating in Washington DC, I'd reconsider this decision if I were you.

[maddog2112]

Do you have to go back to court to reaffirm any loans? Didn`t know that. What happens if you stay in the home long term to payoff. When you`ve built substantial equity does it negatively effect the fact that you never reaffirmed? If you don`t reaffirm and are a little late one month, do they still tack on late fees? 10 years down the road is the equity still yours?

[logansdad]

Do you have to go back to court to reaffirm any loans? Didn`t know that. What happens if you stay in the home long term to payoff. When you`ve built substantial equity does it negatively effect the fact that you never reaffirmed? If you don`t reaffirm and are a little late one month, do they still tack on late fees? 10 years down the road is the equity still yours?

See that's the problem no one can answer this it hasn't been long enough in other words you would have to find someone who filed in the 80's and see what happened.

[aces67]

It`s been 20 days since my 13 to 7 conversion 341. My first and second as well as car payment were all paid outside the 13 and current. I haven`t received anything in the mail about reaffirming the notes. I definately plan on reaffirming the vehicle to prevent any chance of repo, and planned on reaffirming both mortgages. I`m still thinking about it all. When you reaffirm 1st and 2nd mortgages, do you continue to pay the same interest rates with any late payment fees as before? Does riding thru change any interest rates and or late fees. Just doing the research. The 1st has a low 5.5% interest fixed, but the second is 9.9%. Thanks

Riding through won't change any of your interest rates. In my experience you may or may not get reaffirmation papers. My mortgage company immediately realized we were converted and sent out a reaffirmation. My auto loan company never realized we converted so they never bothered to send us anything. They just realized it the other day when my lawyer wrote them a letter explaining it to them.