to reaffirm the house or not

[stueban]

Hello,

I have been a long time lurker, and have found loads of great info from the site. We filed for a ch 7 at the end of last month. And I am just looking for a few opinions.

Our auto lenders are having us reaffirm our loans to them, which isn't a problem with us as we intend to keep the autos. But my concern is with our home. Should we reaffirm the house? We intend on keeping the house, and have no intentions of leaving. We have been told that the lender doesn't have to send us statements or report the mortgage on our credit reports if we don't, but we can continue to make the payments and stay there. Wouldn't these payments be voluntary? Are we still considered owners of the house? Wouldn't it be beneficial to reaffirm the house? We are not upside down in the house, and our mortgage payments is cheaper than what we could rent an apartment for. I am just trying to wrap my head around this.

Any insight is appreciated.

Thanks.

[ccsjoe]

Not reaffirming the mortgage discharges the debt itself, it does not change titling on the house. The payments you make will be voluntary and not reported to the credit bureaus since they can no longer collect against you. Again, their ability to collect against you does not change title. These are separate items and separate laws. That is why you read here about a lot of people of surrendered their homes, but are still paying insurance and HOA dues because the bank is dragging their feet on foreclosing. The advantage of not reaffirming is that if you ever have a problem where you can no longer pay your mortgage you are not liable for it, all they can do is foreclose. No deficiency to sue over, nothing.

[brokejoker]

We didn't reaffirm our mortgage even though we have no intention of leaving. Our thought process is that if we didn't pay the mortgage it would be because we didn't have the money. Probably from a job loss or some medical emergency since we now have discharged our unsecured debts and can easily afford our house payment. Since it would be a case of loss of income, we didn't want to put ourselves behind the 8-ball as far as a foreclosure goes.

For instance, in 2 years DH loses his job. We wouldn't be able to afford the house so we would stay until foreclosure then find something we could afford. The house would go to auction and we wouldn't be responsible for the deficiency amount due since we didn't reaffirm. Otherwise, we stay and pay and wait out the time until we could refile chp 7 if necessary and then we can refinance if we want and take on the burden of the loan again since we would have a way out.

I just don't want to be stuck 7 years away from refiling, with a mortgage we are on the hook for even if it forecloses, and an uncertain economy!

[stueban]

Thanks for the input.

Another question - By not reaffirming, do I still get the same tax benefits of the mortgage that I normally would if I do? And I have heard if you possibly want to refinance in the future, that you are not able to unless you reaffirm?

Thank again.

[ccsjoe]

Yes on tax benefits, meaning you write off the interest on your taxes.

How can you refinance that which you do not owe? The mortgage debt got discharged.

[stueban]

That is what I am trying to figure out. If I don't owe anything, am I essentially renting my house back?

So if we never leave the house, and make payments per the original terms, do we then get the deed as normally you would? What would happen if we wanted to sell the house, and purchase another one? How is that handled if technically we don't owe anything? I assume we would still have to pay the bank something. I also have read the mortgage will stop sending you all statements, so how do we know how our payment is being applied? Would they continue to disperse the tax and insurance money as they do now (our monthly payments includes this already).

I am getting a headache from all this, and I know I am doing to myself by digging/stressing to much into this.

[ccsjoe]

I think this causes a lot of people confusion, you're not alone. The technical definition of your discharge is that the creditors are discharged of their ability to collect from you, the debt itself never goes away it gets written off as a loss. So you are sort of renting, however, at the end of the term and completion of payments, yes you will get the lien removed from the title. As far as the application of payments, mortgage companies will gladly send you "informational" statements upon request, some even do so automatically after you request them.

As far as selling or giving up the house, normal methods apply. Doubtful you can sell for a profit (which would cover the lien amount), so call lender for short sale options or other options.

[stueban]

Thank you for your help. That clarified a lot. I just don't want to get surprised by something that could be handled in the beginning of this process.

[tcreegan]

Hi stueban,

Remember the lender has restrictions on contacting you, so you need to contact them. Ask for a statement, online access, whatever they stopped when they got the BK notice. Usually they start it right back up, no problems.

Reaffirm or not reaffirmed, the lender can report to the credit bureaus...but not unless you ask them, kinda the same situation as statements.

Good luck with your filing,

Tom in Colo

[stueban]

Thanks Tom for the info. We really just don't like the idea of not getting any kind of statement. So in a nutshell, all we have to do is still pay the normal terms of our loan, as if nothing ever happened? As long as we pay on-time, they cant really do anything about it?

[stueban]

We contact the mortgage company, and have informed them that we would like to continue receiving statements. They said they would note the account and continue to do so.

Thanks for the help you all.

[missjean]

Hi Stueban!

Hubby and I are in the same situation with our house; we are current with payments, have equity in the house, and our payment is cheaper than the rental of a studio apartment here! Because we filed pro se, our reaffirmation had to be approved by a judge. She refused to approve it, mentioning all of the disadvantages that have been listed in this forum. Our lender is Chase and the statements that we get from them only show the principle balance due, the payment amount and date due, and the amount and date of the last payment. Did your lender agree to send you complete statements showing escrow amounts, etc.? If so, I am going to contact Chase again.

[stueban]

I am not sure. When we called they said that we already had our next statement in the mail, and that they would note the account and continue to send us our statement. We didn't even know to ask about the escrow information being contained. When the statement arrives, I will let you know how it looks. I hope it will contain the escrow amounts, that way I can monitor it.

[missjean]

Thank you so much! I'll be looking for your post!

[Detroit]

I have also been concerned about making this decision. As it's been explained to me, and mentioned here, if, in the future, I can't pay, I let them foreclose and walk away (tempting in these uncertain times, I agree). However, if I don't reaff and I fall behind again, the mortgage company can say they don't have to help me (ie, refi, modification, etc) since I never signed the reaff. I would be able to refi with another company, assuming I met all other conditions. Thanks for the post, this has been helpful as I think this through.