Post Discharge Questions-Retain and Pay on the house

[Dj1995]

We were discharged earlier this year. On our house, our attorney advised us to "retain and pay" so we DID NOT reaffirm the mortgage; however, I am confused by what this really means. Does this mean in the future if something major were to happen that we just give the house back and we owe nothing else? When/if we pay it off, will it be ours? And what about the mortgage interest.....since it was technically discharged, but we are still paying, is the interest still deductible on our taxes? The IRS defines deductible mortgage interest as something you are legally liable to pay back.....I'm thinking that the discharge removed our legal liability; therefore the mortgage interest would NOT be deductible.....anyone have any first hand experience with this?

[keepsmiling]

There have been many threads on exactly this topic.
According to the people who have BTDT, YES, everything else remains the same. You get all the advantages of home ownership but are free to walk away at any time. That's what that long thread about NEVER NEVER NEVER reaffirming is all about.

So... YAY! Chalk one up for the good guys (us lol)!

No one here has posted that they made regular payments and the bank took the house back. The (somewhat distant) possibility does remain, so it should probably be in the back of your head somewhere; but by and large, the bank would much rather have your money than your house.

[buzzstpoint]

Upon calling my banks collections department about my re affirm papers. One of the questions I had was not signing and continuing to pay.. He directly told me my banks policy is that if your are current and stay current nothing will happen.. "We dont want your house anyway"..

I'm not discharged yet, but the only hassle I have with not signing up,, Is and cannnot pay online anymore.. Plus I dont get my monthly statements. I have to go down to the bank, and have the clerk call the collections department and unlock the account so I can make a payment.

[sh9730]

Buzz,

That will likely change after your discharge. They are just playing it super safe so it doesnt look like they are trying to "collect" from you. Most of regained online access after discharge.

[Gene3x]

Is this to say that if you are not able to make the payment for your first or second before your discharge that they can start foreclosing?
Do you make your house payment during the process?
How does that work?

[sh9730]

Gene3X -

Yes, they can start foreclosure if you dont make your payment while in BK but before discharge - HOWEVER, they must get permission from the court (called "lifting the automatic stay"). But most lenders DO go through this process, if for no other reason to be further along in the process upon your discharge. SO, if you are planning to stay in the home (whether reaffirming or not - most here reccommend AGAINST reaffirming), keep making your payments if you are able. You may have to go into a branch in person to make the payments while you are in the BK process as discussed above.

If you ARENT able to make the payments while in BK, they most likely will start the process - but then you should apply for a modification - at worst it delays them in the foreclosure process to buy you more time - at best you will get the modification after discharge (like I did).

[jst4f]

It is my understanding that the BK changes our mortgage from a recourse loan to a non-recourse loan and that is all. I have read in several posts that the banks can take the house back if they want and I don't see that in our mortgage. As long as you are current you can keep the house and the tax advantages. If things go south for you again, you can walk away and the bank has no recourse relative to you.

[Gene3x]

It is just scary to think that they make it hard for you to make your payments during the process. Are there instances where they out and out refuse to take payment? That right there is the biggest risk in the whole process for me because my house is the last thing that I do have sizable equity in. Drained the retirement and every other thing I have beside house and personal property.

Both of mine are with BOA. Are their known issues with the Beast of all Banks regarding this matter?

[buzzstpoint]

I would think you ask for a statement for the refusal. And ask why the refusal..
Don't spend the payment. Put it in an account so you don't spend it. So if needed when the payment would be allowed you could make a large lump sum to catch up on the payment.

[sh9730]

Gene,

Buzz makes good suggestions - if you are not late - I ve never heard of them not accepting a payment - even in BK - just sometimes not online (its a stretch - but they are worried by posting a statement online for you it is considered "bill collecting" which is against the BK rules).

HOWEVER, I know nothing more about your personal situation, but words like "significant equity" etc. scare me in regards to BK. You realize that except for your allowed exemptions that "equity" may not survive the BK, right? Granted, there can be larger amounts of equity in your home allowed than other things - but you need to make sure you completely understand your situation when you file for BK.