If we signed a home modification....can we still surrender our house???

[icee65]

An update. We filed in Sept 2011, 341 mgt Nov 14. Discharged 1-26-12. In December Chase worked out a loan modification with us, interest rate went from 5.25% to 4%. Owe $137,900 worth about $150,000, payments went form $1095 to $1005.

My husband lost his job Jan 2. (Newspaper industry). We can't afford the house on my income, he gets a severance package thru June, ok until then. I want to walk away from the house.....I think. Can we still do that even though we said we would stay and pay originally.

I hope what we signed was only a loan modification and not a reaffirmation. It was never approved by our lawyer or trustee.

Looking at the paperwork from chase it states under additional comments:

"C. That the Loan Documents are composed of valid, binding agreements, enforceable in accordance with their terms and are hereby reaffirmed."

I. "If the borrowers received a discharge in a Chapter 7 bankruptcy subsequent to the execution of the loan documents, the lender agrees, that such borrower will no have personal liability on the debt pursuant to this agreement"

My husband thinks I'm being a worry wart. So my question is can we still walk away? Discharged chapter 7 no assets, discharged 1/26/2012.

Credit report shows that our balance owed is 0. Discharged. One credit report shows foreclosure processing started. Our first modification payment was due and paid Jan. 1. Another credit reports shows unknown.

In Michigan how long does the foreclosure process take. And house is on five acres i heard that would give us more time.

Thanks in advance for all your great advice. Im on this site more than facebook. Love it.

[helpmeout]

Well, that wording sure makes it look like you reaffirmed the mortgage. You would have to file for BK again to get it discharged, which you can't do until 8 years have passed. Anyway, that is how I am reading what you wrote.

Why not just sell the house? If you get what you have listed as the value, then you come out ahead.

[NoMoreCards]

I understood that wording such as this, does not reaffirm a debt. My understanding was this had to be filed with the corts during the active bk. Check with a attorney for verification with this, but i am real confident that simple wording on a mod will not reaffirm.

[btbeme]

If you did not reaffirm your mortgage in your Ch 7, the modification will not affect your ability to walk away. The terms under (I) above confirm that. The question is whether you reaffirmed - you do need to verify that you did not reaffirm your mortgage in Ch 7.

If the house is worth more than you owe, why walk away - why not try to sell? You can drag out the timeline by not paying, then initiating a sales process or a short sale before they throw you out (which could take many months). You can also negotiate a "cash for keys" with a Realtor, the bank, or the new owner if the house is foreclosed.

Bottom line - I'd stay as long as possible and get the best terms you can for relocating.

[prindia]

You can walk away.. I got a modification one day before filing my chapter 7 with Chase. I didn't sign any reaffirmation papers we can walk away when we are ready to.

[ValleYum]

If you are walking - I would stop paying now and SAVE the severance package funds.

Good luck!!

[helpmeout]

You can walk away.. I got a modification one day before filing my chapter 7 with Chase. I didn't sign any reaffirmation papers we can walk away when we are ready to.

It all depends on the wording of the OP's modification. Especially since the modification was done AFTER filing Chapter 7. In your case, the modification was signed BEFORE filing Chapter 7. There is a huge difference in your case and the OP's.

From what the OP posted, it sounds like s/he is back on the hook for the debt. Just because it wasn't reaffirmed during the BK, doesn't mean that it can't be at any time after the case has been discharged and closed. The I specifically states subsequent to signing the documents, which means after signing the document and does not include any BK before signing the document.

[NoMoreCards]

I respectfully disagree. Reaffirmations must be filed with the court during the BK process. Simply signing a modification with that wording, will not reaffirm a debt.
You can not reaffirm a debt once bankruptcy is discharged and closed.

I found a link which verifies this, but for whatever it won't paste correctly. I can PM it if you'd like

http://www.bankruptcyformprocessing.com/ch-7/reaffirmation-agreements-in-bankruptcy/

[LadyInTheRed]

It all depends on the wording of the OP's modification. Especially since the modification was done AFTER filing Chapter 7. In your case, the modification was signed BEFORE filing Chapter 7. There is a huge difference in your case and the OP's.

From what the OP posted, it sounds like s/he is back on the hook for the debt. Just because it wasn't reaffirmed during the BK, doesn't mean that it can't be at any time after the case has been discharged and closed. The I specifically states subsequent to signing the documents, which means after signing the document and does not include any BK before signing the document.

The language from the modification agreement says the opposite of what you think it says:

I. "If the borrowers received a discharge in a Chapter 7 bankruptcy subsequent to the execution of the loan documents, the lender agrees, that such borrower will NO have personal liability on the debt pursuant to this agreement"

I'm pretty sure "no" should be "not"

Even without that language, a loan modification cannot reaffirm a debt that was discharged in Chap 7, whether it was executed before or after the BK. To reafirm the debt, a reaffirmation agreement must be filed with the court before discharge. It is not possible to reaffirm a debt after it is discharged.

[helpmeout]

I respectfully disagree. Reaffirmations must be filed with the court during the BK process. Simply signing a modification with that wording, will not reaffirm a debt.
You can not reaffirm a debt once bankruptcy is discharged and closed.

I found a link which verifies this, but for whatever it won't paste correctly. I can PM it if you'd like
http://www.bankruptcyformprocessing....in-bankruptcy/

No, but you can put yourself back on the hook for the debt by signing a modification of an existing loan that doesn't expressly state that it was discharged in a BK action. As stated before, you signed a modification BEFORE you filed. The OP signed one AFTER. A huge difference. The OP is probably better off seeking the advice of an attorney who will actually look at the document that was signed.

I do know that some of the BK attorney's on here have specifically mentioned being very careful about the wording of a modification of a mortgage before signing anything because the person signing may have just put themselves back on the hook.

And from what the poster wrote about the modification, my impression is that is exactly what happened.

[sh9730]

Helpmeout,

Sorry to say. You are incorrect about this. I am in EXACTLY the same situation as the OP....modified loan AFTER discharge, not reaffirmed. My modification has the same language that if discharged in CH7, I am NOT personally liable for any debt, but the lender may foreclose on the property to protect their interests.

Now, if one REFINANCES a mortgage, that is a new loan. But as many have said....you cannot reaffirm a discharged debt.

As a matter of fact, my monthly paperwork doesnt even include a "due date", merely list the payment amount. I assume that if I were to stop paying again, eventually they would notify me that they were starting foreclosure proceedings....but Im not even sure they would send me "late" notices? I dont plan to ever find out....

I of course have the added benefit of living in a non-recourse state...so I never really had too much worry of anything but losing the house..

[LadyInTheRed]

I do know that some of the BK attorney's on here have specifically mentioned being very careful about the wording of a modification of a mortgage before signing anything because the person signing may have just put themselves back on the hook.

Are you sure those warning weren't to make sure that it was a modification of the existing debt and not a refinance? It is absolutely incorrect that a discharged debt can be reaffirmed after discharge. The language of the modification is irrelevant.

From Bankruptcy Code Section 524:

c) An agreement between a holder of a claim and the debtor, the consideration for which, in whole or in part, is based on a debt that is dischargeable in a case under this title is enforceable only to any extent enforceable under applicable nonbankruptcy law, whether or not discharge of such debt is waived, only if—
(1) such agreement was made before the granting of the discharge under section 727, 1141, 1228, or 1328 of this title;

It goes on to list the remaining requirements for a valid reaffirmation, including filing the reaffirmation agreement before discharge, the agreement not be revoked within 60 days of filing and the debtor being fully informed of the consequences. Go to the link to read it all.

Anyone who said you can validly reaffirm a discharged debt was wrong.

[murphsmom]

We are in a similar situation. Husband filed bk7 solely in his name, mortgage/deed also solely his name. Modified the mortgage in May, fully modified and in place when he filed in July. No wording whatsoever in the modification agreement regarding future bankruptcy scenario, but the mortgage company was fully aware that he planned to file Ch7. We did check that we were planning to reaffirm the mortgage, however, during the BK the bank NEVER send reaffirmation agreement of any kind. We never signed any type of reaffirmation agreement on the mortgage, and it was discharged in our BK7. Discharged in September, and closed. I have read the mod agreement carefully, and NO WHERE does it state that modification implies reaffirmation of the mortgage. Besides, we modified before filing or discharge, so I just don't see how that could happen...

Husband lost his job this past November. We've since missed Dec, Jan, Feb mortgage payments. Just received a certified letter from the bank this morning stating that we are 60+ days delinquent on the mortgage and if we don't pay the past due amount within 90 days from the date of the letter, that they "may" start legal proceedings against us. Someone at the bank must have missed the memo that this mortgage has been discharged!

We are prepared to walk away from the house if he doesn't secure employment soon. However, we'd like to stay, so if possible we will pay at least one mortgage payment in the next month. If we can't, then we will alert the bank that the loan was discharged, and assume they will start foreclosure proceedings. I'm going to wait to alert them to the discharge for as long as I can though, so they don't jump on the foreclosure proceedings. I'm buying time, basically.

We have no plan to short sell the house, try to sell it outright, etc... We will remain in the house as long as we possibly can, and save enough money to purchase something smaller under my name only next year. Best of luck to you, but from reading your post, I think you're safe to walk away.

[LadyInTheRed]

murphsmom, even if the mortgage was discharged (and it sounds like it was), the bank would still send you a notice of an intent to foreclose when payments are late. Legal proceedings include foreclosure. If they start threatening to sue you for a deficiency, then you need to remind them that the debt was discharged. But, that probably won't happen until after the foreclosure.

[icee65]

THANKS FOR THE REPLIES


I pulled out our paperwork from chase. Cover letter states: We are please to inform you that you have completed the requirements for a permanent modification to your loan. We have enclosed a sign copy of the Loan Modification for your record.

We signed it on 11-23-2011. Our house mortgage was discharged on 1-26-2012. So im hoping we will be okay if my husband doesnt get another job soon and we have to walk away after staying as long as possible AND NOT GET CHARGED FOR A DEFICIENCY!