Home Reaffimation Question

[DaisysMom]

I've read dozens of negative comments about reaffirming a mortgage. If a person is filing Chap. 7......Let me ask....are there any positives....reasons that you would want to reaffirm?

DM

[blueeyz]

I'm trying to figure this out too. A positive for me would be the positive credit reporting for your on time mortgage payments. Perhaps, refinancing as well for some people but for me, I already have a good rate and low payment so the only pro I see is the positive credit reporting.

[despritfreya]

Hum,

"are there any positives....reasons that you would want to reaffirm (a mortgage)?"

Let me think. . .Nope. . . Can't think of one. But. . . that's just me.

[tcreegan]

Hi DaisyMom,

Not really any advantages, you can request your lender to report post-BK and notate the line 'paid as agreed'

You stay current and stay in the house, all the advantages of not reaffirming and none of the liabilities of a reaffirmation.

Some things to consider: are you absolutely sure your income will be intact and steady for the next 8 years?
Are you absolutely sure your housing market will steadily improve for the next 8 years?
Do you have a fixed interest rate below 4%?
Do you have some equity in the property?
Is it free of other liens?

Definitely a big decision, something to talk over with an impartial financial advisor,

Tom in Colo

[DaisysMom]

I have a modified mortgage...5% interest. Only owe about 25K and my payment is only $165 a month. Have about 15 K in equity. The housing market here is in a slump just like most of the country, but it won't affect me because I am getting close to retirement and want to stay here for the remainder of my life. I am fortunate that the conditions are so much in my favor.
I was just curious about why I wouldn't want to reaffirm...pros and cons.

DM

[debee]

Not all aspects of bankruptcy decisions are purely about paperwork and numbers. (even though I concede they should be) Some emotions and psychological energy does come into play. We are humans, and this is unavoidable.

I don't believe in making decisions based on fear. To never rebuild credit because of fear of what might happen in the future, is counterproductive to the fresh start that bankruptcy provides. Not reaffirming a mortgage leaves the borrower in a state of credit limbo, that reaffirming clears up. For some, with large second mortgages, or high interest rates on cars, this makes sense, since the benefit of not being responsible for the second mortgage, outweighs the security of reaffirming. For many of us however, a "fresh start" means that we want to get on with our lives without ambiguity and legal loopholes. As in anything regarding bankruptcy, every case is different.

For me, the biggest relief I had with bankruptcy, was that the burden of unresolved debts was no longer hanging over my head. When debts are not reaffirmed, but the collateral is not turned over, that ambiguity and uncertainty is carried into the fresh start. Some people can handle that, and so not reaffirming will be a good decision for them. For me, however, I wanted to know that the old debts of the past were settled one way or another and that my fresh start was not going to be carrying in the baggage of my pre-bankruptcy past (except for my student loans of course). As with anything ymmv.

I copied this quote from the "sticky" titled 'Why reaffirming is a very very very bad idea". I thought it presented another way of looking at reaffirmation that was equally valid.

[zpbk13]

I don't post much anymore but thought I would add my two cents about not reaffirming since I received so much help from this site.

One good reason NOT to reaffirm is that you do not know what the future will hold. Case in point: We almost reaffirmed but our attorney suggested not to. She echoed the advice on this board. There is no reason to put yourself back into debt when you are free. Little did I know, how true her words were. Within a few months of discharge, my husband lost his job, lied to me about it for months, tried to commit suicide and spent quite a bit of time in the hospital (first ICU and then mental health ward). It has been one year on November 12 since he lost his job and he has not found another partly because of the economy and partly because of his depression that he refuses to get help for. I have not been able to carry the water like I thought I would alone and have not made a mortgage payment since March 2010. I do not know what will happen to my marriage in the long run but I do appreciate not having to worry about this mortgage being over my head.

Everyone's story will be different but I am so glad I followed my attorney's advice. It will be sad to leave our home eventually. But at least I will not have to worry about a deficiency balance.

[jeff722]

Hi everyone. This is the first time I have posted. I have learned a lot reading this board. Well as of November 9 my chapter 7 bankruptcy was discharged. I live in East TN. I presented it to my attorney several times about not reaffirming. She said that was not really an option. Most people that came through her office did reaffirm their mortgage if they kept their house. I personally did not have a problem signing a reaffirmation. Just find it interesting at the differences of opinion. My lawyer works at a very reputable law firm which is one of the largest in the area. Everything went very smooth exactly how she said it would. She was saying that most people do reaffirm their houses. I guess it has a lot to with what district you live in.

[despritfreya]

I live in East TN. I presented it to my attorney several times about not reaffirming. She said that was not really an option. . . I guess it has a lot to with what district you live in.

Just curious. . . go back and ask her where in the bk code is the requirement to reaffirm a mortgage since she has indicated that not reaffirming is "not really an option".

Des.

[Floridagail]

What do you have to gain by reaffirming your mortgage, nothing. Life takes enexpected turns so better to be safe than sorry..


Sorry Zpdbk13, hope things get better.

[bkzips]

I just got off the phone with my atty's office. They are telling me that if I do not sign the reaffirmation agreement, it will be considered default and the lender can immediately foreclose and take the house. I have been reviewing my deed and note and see nothing about bankruptcy defining default...

What am I going to to? Anyone knwo what they might be referring?

[despritfreya]

I just got off the phone with my atty's office. They are telling me that if I do not sign the reaffirmation agreement, it will be considered default and the lender can immediately foreclose and take the house. What am I going to to? Anyone knwo what they might be referring?

Ask him/her for the Case authority that states that in Utah you must reaffirm the Mortgage (who knows, maybe there is such a thing). If there is no Case authority ask him/her where in the Bankruptcy Code such a requirement is mentioned or under what State Statute such a requirement is mentioned. If he/she cannot give you "authority" for such a proposition, discuss the matter with several other attorneys in your State to find out why he/she is telling you this.

Des.

[bkzips]

Ask him/her for the Case authority that states that in Utah you must reaffirm the Mortgage (who knows, maybe there is such a thing). If there is no Case authority ask him/her where in the Bankruptcy Code such a requirement is mentioned or under what State Statute such a requirement is mentioned. If he/she cannot give you "authority" for such a proposition, discuss the matter with several other attorneys in your State to find out why he/she is telling you this.

Des.

Thankyou despritfreya. I feel like the atty's altruistic attitude is getting in the way of sound legal advice. They say that UT. defaults to contract regarding the area inwhich they allow the lender to negoitiate a default on a bankruptcy. So, i have been reading my deed and I see nothing regarding default -except if we don't pay and are 30 days late. I have my first and my second with same lender/Citi and Citi only sent a reaffirm agreement for the 2nd and the 2nd is completely upside down in this market.
Plus, we discharge on December 6. Isn't the reaffirmation supposed to be signed before discharge? Atty says close.
Help if you have any further advice. I have read through the pinned thread you authored and I completely do not want to reaffirm but I don't want to leave the house either.

[despritfreya]

[QUOTE=bkzips;478306]I feel like the atty's altruistic attitude is getting in the way of sound legal advice. They say that UT. defaults to contract regarding the area inwhich they allow the lender to negoitiate a default on a bankruptcy. Plus, we discharge on December 6Isn't the reaffirmation supposed to be signed before discharge? [QUOTE]

The reaff, to be effective, must be entered into prior to the entry of the discharge. This means it must be signed by all parties before the discharge. It can be filed after the entry of the discharge and even after the close of the case (upon reopening) but it MUST be signed by all before the discharge.

Once again I am going to apologize for this long post, but, after you read it, print it out and take it to your attny. Unless he/she can point to Case law supporting his/her argument I believe he/she is wrong. So, here it goes:

______________________________

It has been long standing in the 10th Circuit, which includes Utah, that one does not have to reaffirm. This dates back to the 1989 decision of Lowry Federal Credit Union v. West, 882 F.2d 1543, 1546 (10th Cir. 1989) where the Court determined that a debtor may also retain encumbered property without reaffirming or redeeming if the debtor continues to make payments on that property in accord with the original note.

More specifically - quoting from the Decision:

“This is an appeal from a ruling of the district court sitting as an appellate court in bankruptcy. The question presented is whether the debtors' failure to comply with the mandatory requirements of 11 U.S.C. Sec. 521(2) gives a secured creditor an automatic and conclusive right to repossess collateral. A secondary question is whether a bankruptcy court can permit debtors to retain the collateral upon performance of certain conditions even though the debtors have neither redeemed the collateral nor reaffirmed the debt for which the collateral provides security. We conclude the debtors' failure to file the notice of the election required by Sec. 521(2)(A) does not result in an automatic benefit to the creditor. We also conclude, under the facts of this case, the bankruptcy court acted within its discretionary authority to permit the debtors to retain the collateral without either redeeming or reaffirming. We therefore affirm the judgment of the district court. . . In sum, although we regard as mandatory the provisions of Code Sec. 521(b), we do not believe those provisions make redemption or reaffirmation the exclusive means by which a bankruptcy court can allow a debtor to retain secured property. When the state of the evidence indicates neither the debtor nor the creditor would be prejudiced, a bankruptcy court may allow retention conditioned upon performance of the duties of the security agreement as a condition of retention.”


The Utah State Bar recognized that BAPCPA only changed the Lowery decision as it relates to personal not real property. Interestingly the below dissertation makes no mention of real property and since the 2005 provisions specifically reference personal property, to the extent that we are dealing with real property Lowry appears to still be good law despite the below title "Farewell to Lowry".

Utah State Bar journal, Volume 18 No. 3 May/June, 2005:

"Farewell to Lowry. . .:

In Lowry, the 10th Circuit held that a debtor may retain collateral without either redeeming the collateral or reaffirming the debt if the debtor is current on payments to the creditor. Lowry allows a debtor to discharge the underlying debt while the creditor retains its lien on the collateral. If the debtor stumbles financially in the future and fails to make payments the creditor may repossess the collateral but may not sue the debtor for a deficiency.

(BAPCPA) overrules Lowry and new Section 521(a)(6) requires an individual debtor in a Chapter 7 case to surrender personal property collateral or to reaffirm the debt or redeem the property within 45 days after the meeting of creditors.

An apparently conflicting provision in Section 521(a)(2)(B) requires the debtor to perform his stated intention within 30 days after the meeting of creditors. Under new Section 362(h), the personal property is no longer property of the bankruptcy estate and the automatic stay terminates if the debtor fails to file timely a statement of intention and to either redeem or reaffirm the debt secured by the personal property or to assume an unexpired lease, such as a vehicle lease, pursuant to Section 365(p).” (Emphasis added)

__________________________________

So, after having read all of this, print it out and go back to your attorney and again ask for Case Law that requires you to reaffirm. Also ask her to put in writing what happens if you do reaffirm and fail to make the payments and whether or not Utah is an anti deficiency state.

Des.

[bkzips]

Des,
Very nice. This is very informative and I am absolutely throwing that in their face with something I also found after you posted. Honestly, after scouring the two Deeds et al. and finding nothing contractually saying the lender has the legal right to foreclose simply for filing bankruptcy & not reaffirming loans I found this portion of the below link ironic.
Our atty received the reaff on sept 7th and we did not receive it from our atty until this week -4 business days before discharge date. Based on the information below, we are too late to even file reaffirmations -if our lender and we wanted to. Our atty said today, that we could file reaffirmations AFTER discharge. This completely disagrees with it....

http://www.theomphalos.com/Bankruptcy2/?link=%5B5%5Ddebt_c7

Reaffirmation is an agreement with a creditor that you wish to retain the collateral and continue making your regular monthly payments. Reaffirmation most often occurs in connection with homes and cars. In each case in which a client indicates a desire to retain an item of secured property a letter is sent by the attorney to the creditor requesting a reaffirmation agreement. Under 524(c) the reaffirmation agreement must be signed (by debtor and creditor) and filed with the court before the case is discharged (usually 60 days after the first meeting of creditors). Unfortunately, many creditors do not respond. In fact, many creditors (including those you wish to continue to pay) will not send you monthly statements after you file.

This creates a dilemma under the new law. New section 521(a) states that you must reaffirm on all property within 30 days of the first meeting of creditors, which is contrary to the 60 day limit of 524(c). Further, section 362(h) states (with one limitation that will be mentioned below) that if a debt on personal property is not reaffirmed within 30 days of the first meeting of creditors the stay is automatically lifted as to that property. A third date is found in new section 521(a)(6) which requires a debtor to surrender personal property that has not been reaffirmed or redeemed within 45 days of filing. The same section indicates that if you have not complied with this provision the stay is lifted and “the creditor may take whatever action ... is permitted by applicable nonbankruptcy law ...” Nonbankruptcy law says that a creditor cannot repossess or foreclose property unless (1) you are behind in your payments, (2) the contract includes a “bankruptcy” termination clause, or (3) the contract includes an “insolvency” termination clause. Under the old law you could retain the collateral without a formal reaffirmation as long as you continued to make your payments since “bankruptcy” and “insolvency” clauses were deemed void. The new law over rules the Lowry case. Thus a creditor can refuse reaffirmation and take back collateral if you are current on payments but your contract includes a “bankruptcy” or “insolvency” clause. Section 362(h) seems to state that the stay is not lifted if a debtor attempts to reaffirm before the 30 day deadline “on the original contract terms and the creditor refuses to agree to the reaffirmation on such terms.” However, only sections 521(a) and 524(c) apply to real property.

If you find yourself in this situation post-filing with an uncooperative creditor who will not prepare or sign a reaffirmation agreement and you wish to retain the collateral, you should continue to make your regular monthly payments. However, you must be very careful. If you ever get behind on your payments or your insurance lapses they can immediately take back the property. They will not work with you to catch up payments if you get behind and they may actually refuse to speak to you about your account.