Reaffirmation Questions

[CreditCretin]

I know this has been discussed before, but maybe I just need some more reassurance as well...

We are in the middle of our Chapter 7 and I have some questions about reaffirmation, particularly with our house. I live in Illinois, if that makes a difference with the laws. Our mortgage is with GMAC. The house is currently about maybe 25K upside down, maybe a little less, but definately at least 10K upside down. However I have ever intention (at this point) to keep and stay in the house as we can afford it after the debt we have is discharged, the rent in our area is just as high as our mtg payment etc.. GMAC is making it difficult to re-affirm in that they don't even send the documents to the attorney anymore, they make the attorney go online and download the documents and fill them out themselves. I have read time and time again here about not re-affirming, and it does make a lot of sense not to. My biggest fear is that I do not want to risk losing the house at some point in the future if, for example house values skyrocket, which I know is a pipe dream, and the bank determines that they could make a profit selling the house. My attorney's office is telling me that won't happen if I keep making payments, but that I won't have the payments reported to a credit bureau and when we do sell, I may have to get a statement from GMAC showing we are current on all payments. I am really leaning towards not re-affirming. The thought that if something unfortunate happens financially in my future, that we could walk away seems like a great benefit of NOT re-affirming. I guess I am just looking for some expertise with the mortgate banks that they will not try to take my house in future, for any reason, if I am current, and stay current with my payments. Anyone have any thoughts, or can assuage my fears about not re-affirming.

On a side note, it looks like we will be re-affirming our car loan. Not sure if this is right or not, but the lawyer is suggesting it because Toyota has stated in a letter to us that pay and retain is not an option anymore, and that if we do not re-affirm, redeem or turn in the vehicle, the automatic stay will be lifted 45 days after our 341 and they move to repossess. Again our car loan is affordable to us so it isn't a hard ship and we have a good loan rate (3.9) which I know will be years before I see that kind of rate again.

[brokejoker]

We went into ours thinking we were reaffirming the house and cars. The cars we did reaffirm because we have equity in the vehicles, the time left on the loans is short, the cars are newer year models, and we can afford the payments.

Our original intention was to reaffirm both the first and second on the house. Now I realize that we are underwater on the second by about 15K. To me that means under no circumstances are we reaffirming the second. With just the first mortgage we have equity in the home so we were kicking around the idea of reaffirming. Then I got to thinking (dangerous). IF we reaffirm and cannot make the payments then we are on the hook for the cost of foreclosure, balance of the loan. If we stay and pay and make our payments on time we can stay in the house. If we stay and pay and do sell the house in the future then we can pay the balance due on the mortgage and still get benefit of any equity in the home.

If we stay and pay and CANNOT make the payments it will be because we are in serious financial trouble and we will need the ability to walk away without penalty. I figure that since we now have a budget and a savings account for emergencies. Our eventual goal is to have enough in savings to cover at least 3 months and hopefully 6 months of expenses, including the mortgage. If we get in the situation we cannot pay the mortgage it would be because of catastrophic medical needs, long-term job loss, death (God forbid), or some other dire event so we now want the safety net of being able to walk away free and clear if the need arises.

So, we reaffirmed cars but changed our minds and will not reaffirm the mortgages.

[nomoneynomore]

We reaffirmed our house & our vehicle. However, we were not upside down on our house, rather, it was worth about $25k more than what we owed on it. We knew we would sell it shortly after we discharged & pay off the vehicle.

I'd be worried about being upside down on it, especially in this economy. BK is supposed to afford you a fresh start at life financially. If you are starting back out in the hole, you still have to dig up to get out. The way I look at it is, yes you can afford it today, but what about next week? What if you lose a job, get sick etc. If you reaffirm & something drastic happens, you are stuck, no choices to get out.

Even though we did reaffirm, PNC (National City) Mortgage refused to ever update our credit reports to show paid or anything. It still shows up as IBB, which really irriates me. We weren't given an ounce of credit for keeping the house & paying it off.

[tcreegan]

GMAC incompetence

Hi creditcretin,

All I can say is good luck dealing with GMAC mortgage, I went around and around with them trying to get a loan mod. After 6 months of negotiations and no progress, I filed BK and surrendered the house. Now I have a nice place and a local guy is carrying the note. So much easier......

Tom in Colo

[CreditCretin]

tcreegan, I agree, I was surprised when I called them at how difficult it was to get a reaffirmation document. They don't send them anymore to attorney's, or customers, you have to go to the court website and fill out the form yourself I guess.

Does anyone know if, in Illinois, they can take your house from you if you don't reaffirm a mortgage and are current on all payments for any reason, or where I could research this issue?

[blockhead]

Someone in another thread, an attorney I believe, said there is a provision in the BK law that broadly prohibits lenders from changing the terms of an existing contract just because BK was filed. Then there are state laws too that can offer protection.