Retained attorney yesterday..? about surrendering home

[youngnbroke]

So we retained our attorney yesterday and told him we've decided to not reaffirm the mortgage when the time comes. All along I've been thinking that we'd just not reaffirm the mortgage, stay here till the house forecloses and we'd have a nice nest egg for moving next year. WRONG! He explained to me that our only option to avoid the banks coming after us in the future for a deficiency is to go into the bankruptcy with notice to surrender the home and we'd most likely have to be out in about 4 months and to start looking for a rental. I freaked! Is this correct?!! Everything I've been reading made it seem like the only option out of the house was foreclosure and that we simply could not just "hand" the house back??! I realize that things work differently in different states, but was just wondering. I've been looking around and we are preparing to move sooner rather than later, but i'd much rather live rent free for a long while! BUT obviously, do not want the bank to come after us in the future!!

[justbroke]

All along I've been thinking that we'd just not reaffirm the mortgage, stay here till the house forecloses and we'd have a nice nest egg for moving next year. WRONG! He explained to me that our only option to avoid the banks coming after us in the future for a deficiency is to go into the bankruptcy with notice to surrender the home and we'd most likely have to be out in about 4 months and to start looking for a rental.

Time to talk to a new attorney and have them re-explain it. The bank can NOT come after you for a discharged debt (period). Unless you reaffirm the debt, the bank is enjoined from attempting to collect on any "future" deficiency.

As such, I don't understand why you wrote WRONG. You even write that the attorney informed you that you need to NOT reaffirm (mark surrender on the Statement of Intentions). (However marking "reaffirm" on the Statement of Intentions is neither binding nor an indication that you actually reaffirmed.)

I think you're just confused. So, here's the deal. Here are the circumstances that will not have you liable for any future deficiency:

1. You mark "reaffirm" on the Statement of Intentions but NEVER file a reaffirmation agreement
2. You mark "surrender" on the Statement of Intentions but NEVER file a reaffirmation agreement

In each of these situations, you MUST receive a discharge.

The only way to have a deficiency come back and get you is if you actually... file a reaffirmation agreement, or you never receive a discharge.

[ssmdem]

1. You mark "reaffirm" on the Statement of Intentions but NEVER file a reaffirmation agreement
2. You mark "surrender" on the Statement of Intentions but NEVER file a reaffirmation agreement

In each of these situations, you MUST receive a discharge.

The only way to have a deficiency come back and get you is if you actually... file a reaffirmation agreement, or you never receive a discharge.

I have a question about (A), as I think my attorney touched on this the other day, but I was just confused. If we mark reaffirm - are we not agreeing to reaffirm at that point?? I'm asking because she said if we wanted to use the mortgage payment on the expenses, we had to reaffirm. I immediately thought, "No way, not reaffirming that loan!!" But now I'm wondering if this is what she meant. We're upside down on this loan big time, and I'm not reaffirming it, but we could still check that box and use it as an expense and then just not sign the agreement?? Seems like that would almost be fraudulent - not saying it is - just sounds weird.

[justbroke]

If we mark reaffirm - are we not agreeing to reaffirm at that point??

No, it's your intention to, but the intention can only become binding upon you signing and filing a reaffirmation agreement with the court.

I'm asking because she said if we wanted to use the mortgage payment on the expenses, we had to reaffirm. I immediately thought, "No way, not reaffirming that loan!!" But now I'm wondering if this is what she meant. We're upside down on this loan big time, and I'm not reaffirming it, but we could still check that box and use it as an expense and then just not sign the agreement??

Technically, many Districts require you to "state" that you are reaffirming in order to claim the mortgage payment. Some United States Trustees (USTs) don't care if you reaffirm or not, if you're under the median income.

However, for an over the median income filer who is depending on claiming the mortgage payment as an expense, the UST will probably be watching more closely! This is probably where you were confused.

It's not fraudulent and many people use that strategy. There are many times a person changes their mind after "thinking" about the impact of actually reaffirming. So much so, that the Court allows you to withdraw a reaffirmation within 60 days of singing it... even if that 60 days is AFTER the discharge!

The real question is, would your attorney even sign your reaffirmation agreement. Many won't.

[ssmdem]

There are many times a person changes their mind after "thinking" about the impact of actually reaffirming. So much so, that the Court allows you to withdraw a reaffirmation within 60 days of singing it... even if that 60 days is AFTER the discharge!

Wow! Didn't know that either. Interesting. We're over the median, but barely. We're waiting to file until December for a couple of reasons - one being that we will be under the median at that point. We'll be 8 months behind on the mortgage payment at that point (if our modification doesn't go through). But our rental property will be current and we may just use it as the housing expense then. I'm praying our modification goes through though so we can just stay here until we're ready to let it go.

[dmu]

No, it's your intention to, but the intention can only become binding upon you signing and filing a reaffirmation agreement with the court.

Technically, many Districts require you to "state" that you are reaffirming in order to claim the mortgage payment. Some United States Trustees (USTs) don't care if you reaffirm or not, if you're under the median income.

However, for an over the median income filer who is depending on claiming the mortgage payment as an expense, the UST will probably be watching more closely! This is probably where you were confused.

It's not fraudulent and many people use that strategy. There are many times a person changes their mind after "thinking" about the impact of actually reaffirming. So much so, that the Court allows you to withdraw a reaffirmation within 60 days of singing it... even if that 60 days is AFTER the discharge!

The real question is, would your attorney even sign your reaffirmation agreement. Many won't.

Thanks Justbroke. This is great info.

[youngnbroke]

Ok this is all exactly what i originally thought before seeing the attorney. We have to get some paperwork together and the next time we go I will be sure to clarify this whoooole thing. I just hope we didn't hire a schmuck Maybe he misunderstood me, or i misunderstood him...but what he said didnt sound right.

So bottom line is - check the box that we want to reaffirm..but not actually reaffirm when the other paperwork comes thru, then wait for foreclosure?!

I'm just pretty sure i "comprehended" what the atty said...so I just wonder why he would say that??!!

[youngnbroke]

Ok upon further explanation from my husband, he thinks that i may have misunderstood the atty!! I sure hope so! But thanks for responses, i think i know where to go from here!

[justbroke]

I don't think the attorney can condone you stating a falsity. In other words, you must "know" that you "intend" to reaffirm. However, after later thought and consideration, you choose not to reaffirm. It may just be an attorney thing.

I put reaffirm on my paperwork, although I was "thinking" about not doing so. After my bank gave me a modification and told me that I don't have to reaffirm to get or keep the modification... I "changed" my mind. I had to beg them for a reaffirmation agreement, and they sent it. However, i was told again, that I didn't need to do it. I did not reaffirm.

[ssmdem]

I don't think the attorney can condone you stating a falsity. In other words, you must "know" that you "intend" to reaffirm. However, after later thought and consideration, you choose not to reaffirm. It may just be an attorney thing.

I put reaffirm on my paperwork, although I was "thinking" about not doing so. After my bank gave me a modification and told me that I don't have to reaffirm to get or keep the modification... I "changed" my mind. I had to beg them for a reaffirmation agreement, and they sent it. However, i was told again, that I didn't need to do it. I did not reaffirm.

Maybe THAT'S why I was confused. My attorney also works as a trustee as well, and a couple of things I questioned (this being one of them), I kinda got a "look" from. That may be what she was getting at. She STRONGLY encouraged me to be in a rental before we filed so that the rental amount could be used as the expense and not the IRS standard. But then she also said to stay here and live free for as long as possible. By the time we file though, we're already at 8 months - so we're already probably pushing it at that point.

However, if this modification goes through, I really just want to stay here and "rent" until we're ready to walk away. ARGHH!! Decisions!!!

[iv65536]

To youngnbroke:

I'm assuming the property is in Wisconsin.

Are you still paying on the mortgage? if not, where in the foreclosure process are you?

[youngnbroke]

Yep, in SE Wisconsin..and foreclosure hasn't even begun. Our last 2nd mortgage payment was in May, and our last 1st mortgage payment was made last month.