Chapter 7 and Mortagage Payments

[gusnjax]

My situation...My wife and I haven't paid any credit cards in 2 years. We also fell behind on our mortgage 2 payments. So we decided to restructure the loan which would end up saving us $300.00 a month. We were about 99.9% done with the process, when we started receiving summons letters from the CC companies. So we decided to file Chap 7. Well then the process with the restructure got halted. Make a long story short....since filing we haven't made a mortgage payment. And know one showed up at our creditors meeting to dispute anything. All we have left to do is complete the post op class and send in the letter with the confirmation number. We did reaffirm our 1st and 2nd mortgages and car. Both the 2nd and car are on auto withdraw from our account. I have received one phone call from Wells Fargo when we first filled saying this person was the point of contact. So I have tried to contact this person several times...and nothing. So I guess my question is....once discharged..since i reaffirmed the mortgage..will we just start making payments again once it's over......looking for advice...

[ValleYum]

My advice would be to nullify your reaffirmations on your mortgages ASAP!!! You don't have to reaffirm to get your lender to modify/restructure/settle your mortgages. How long ago did you file you reaffirmation agreements with the court?

Did your attorney advise you to reaffirm a mortgage you are delinquent on as well as to reaffirm a second mortgage, too?

Do you have a high amount of equity in the home?

What if you lost your job or became disabled... you can't file bankruptcy again for several years.

There is a "Sticky" on here called: "Why it is a very bad idea to reaffirm your mortgage..." I will try to link it for you later as I am on a tablet right now and not my PC. You should try to find it and read it as it has invaluable information in it.

Reaffirming your mortgages (except in super rare circumstances) pretty much undoes all the good that your bankruptcy did for you, IMHO. I think it is even worse to reaffirm both a delinquent mortgage *and* a second.

I hope others will stop by this thread and give their opinions, too. Good luck!

[btbeme]

I can see reaffirming the car in some circumstances, but never a mortgage.

Why?

Because a car is easy to take back and resell, and a house is a gigantic pain in the butt albatross around the bank's neck, and they will ALWAYS try to find a way for you to keep it rather than take it from you. Always.

And as is stated above, in this day of depreciating home values and huge negative equity, having the ability to walk away later with no lawsuits or penalties is something everyone should have.

Nullify the mortgage reaffirmations, immediately, before it is too late. I cannot see any reason why you would want to reaffirm them.

[gusnjax]

Well with the Chap 7...I thought you had to reaffirm all secured dept to keep it...house, car....Our second mortgage is not in default.....nor our car payments....we just didn't pay the CC'rds and we missed 2 house payments....then went into restructuring .....I'm just trying to figure out what happens with my first mortgage once I receive my discharge.....should I expect Wells Fargo to start contacting me concerning the missed payment during the filing....or is that something that is covered when you file....

[sh9730]

Gus,

It can vary, and yes, there is a chance you still might lose the house if you dont reaffirm and are BEHIND on payments (if you are current this is a moot point as you will get to keep the house as long as you keep the payments current - but I believe you said you are behind on mortgage also now). BUT, first of all, I dont think the court will APPROVE a reaffirmation if you are behind, a lot of times they wont even approve if you are current (again, read the sticky post that the others told you to read about reaffirming a mortgage). Even IF they would approve, still a bad idea to do it.

What will happen (if you dont reaffirm) is that the mortgage(s) will be discharged and you will no longer have financial responsibility for the loan - HOWEVER, if you dont work out some payment arrangements with your lender(s) they can still foreclose on the house and take back their property - but you will not have to pay any amounts that you owed. BUT, if you reaffirm and are still behind, and they come get the house, then you WILL be responsible for any back payments owed, as well as the difference between what you owe and what they sell the house for (varies from state to state).

Now, there is no GUARANTEE that the bank will try and work out something with you after you get discharged in the CH7, but as others have said....they dont want the house! Especially since they cannot even come after you for any money...so if you can show them you can make payments now that all your other debts are gone, you very may well get a modification agreement from them.

That is exactly what I did - but with Chase, not WF. I was behind on my mortgage, declared CH7 BK, did NOT reaffirm, made no payments at all during all the BK. After discharge I was able to work out a modification with them and they waived all late fees, legal fees, and worked out a repayment plan for all my escrows, lowered my interest rate, and extended out my loan a couple of years to cover the interest I wasnt paying since I wasnt making payments. Worked out well for me - AND - if something happens where I cannot make the payments in the future, the loan has already been discharged, so all they can do is take the house. Best of both worlds in a way (but not saying BK didnt have consequences - duh!).

Again, you need to be PREPARED that they may NOT work with you....but that could happen if you arent caught up with your payments anyway - and if you reaffirm then you are on the hook on top of everything else! But, on the other hand, they probably will try and work out something. Also, you almost assuredly can work out a settlement with the second mortgage to get rid of any threat of foreclosure completely. So dont even think about the 2nd until you figure out what is going on with your 1st.

Finally, again, I dont think the court will approve a reaffirmation if you are not current on your payments - they have to "look out for the best interest of the debtor", and this isnt. Of course, all this assumes you are filing a Chapter 7 BK, and not a CH13, which is an entirely different animal when it comes to mortgages.

[LadyInTheRed]

gusnjax, are you sure you reaffirmed the mortgages? Indicating on your petition that you intend to reaffirm doesn't mean you did or have to. Did you sign a reaffirmation agreement that was filed with the court along with a certification by your attorney that the reaffirmation is not an undue hardship to you and that you have been fully informed of the consequences of reaffirmation? If no reaffirmation agreement was filed, you did not reaffirm the mortage. If a reaffirmation agreement was filed, you can rescind it if within 60 days of the filing date.

Whether or not you reaffirmed your mortgages, if you want to prevent foreclosure, you need to bring your morgtgage current, especially if there is enough equity to cover the first mortgage. Wells Fargo will not contact you about payment during your Chap 7 without first obtaining an order for relief from stay from the bankruptcy court. The automatic stay prohibits them from attempting to collect payments from you while in BK. They are more likely to wait for discharge than to file a petition for relief. But, that doesn't mean you should wait until after discharge to get caught up.

Why did you stop making mortgage payments after filing? Are you sure you can afford to keep your home?

[tomnikids3]

I'm in the process of filing chapter 7 and reaffirming my 1st and 2nd mortgage. This is why i'm considering reaffirming: My 1st and 2nd mortgage before the mod was at 504K monthly payment roughly 2950 a month, My bank has forgiven 176K, and my new payment is now 1899.00 per month, I am currently out of work and my wife is still working. Even me being on unemployment this payment is affordable. We were thinking of not reaffirming, moving and renting but the average rent in our area for town homes and single family homes start 2200-3000 a month. With that being said we are in our worse case scenario since having been out of work for some time. We just want to relieve ourselves of the credit card debts incurred then we will have just our mortgage, utilities and home maintenance expenses, which will not be a hardship with our combined income. Would you still suggest not reaffirming in this case?

[SMinGA2]

I would. 2 scenarios:

1) you don't reaffirm, but keep making the payment. Life is good, no worries.
2) you reaffirm, your unemployment runs out, and you haven't replaced the income. You can no longer afford the mortgage - and the bank can pursue you to the full extent of the law for any deficiency amounts after foreclosure sale.

As long as you make the payments, it doesn't matter if you have reaffirmed or not. The issue is what happens if/when you can't make the payments?

Would you still suggest not reaffirming in this case?

The way to keep the house is to keep up with the payments. Reaffirmation on a home is not required - because no state allows a lender to foreclose as long as you pay as agreed. Reaffirming takes away your emergency escape plan, should things go bad at some point in your financial future.

[btbeme]

This would be, maybe, the third time I have heard of a bank doing a principal write down. In virtually every case, they do not forgive the amount; rather, they create a "balloon" payment on the back end of the loan and simply ignore that amount when calculating the new payment. Is this the case in your loan, or did the bank actually write off the $176k? If they wrote it off, that is a HUGE win, and like I said only the third time I have actually seen it (and NEVER for anywhere near that amount) - although I do know that a handful of banks in some very narrow and specific cases have experimented with this type of write down.

Even so, I do not see any advantage to reaffirming the loan. So long as you stay current on the payments there would be no action to reclaim the house, and should disaster strike you are still personally unencumbered by the debt. And in New York is sounds like there would be a wait measured in dozens of months before a bank could actually complete foreclosure. And, if you stay current, you can certainly ask the bank to continue to report you positively to the credit bureaus - most will do so. Not reaffirming has no real negative impact on your relationship with the bank.

That's my opinion, and unless I can hear a very compelling reason TO reaffirm, I'd stick with not doing so.

[tomnikids3]

You are correct there is a balloon in 24 years, but the 176K is not back ended on this, 176k is the actual write down. Also my bank is actually one of the few doing these type of mods and have been doing these since august 2010. I have seen cases of more written down than mine. With that being said I will take the advice of this board and not reaffirm either mortgage luckily i didn't give the paperwork to the attorney yet.

[btbeme]

Getting a write-down is an awesome achievement - congrats! Hopefully more people will get that applied, as I believe it to be a much smarter move for the banks than pressing foreclosure.

[tomnikids3]

Getting a write-down is an awesome achievement - congrats! Hopefully more people will get that applied, as I believe it to be a much smarter move for the banks than pressing foreclosure.

It was a total surprise, when we first got it i researched to make sure it wasn't some temp fix, or the interest rate would go up later on, but, its fixed at 2% for life of loan. Me and my family was prepared to bid our time and discharge everything but now upon the information im getting here I see what my next step is so im glad i found this forum thru Loansafe.org. As i mentioned my bank is one of the very few that does this and my investor allowed it as well so in some aspects we lucked out. Now if i can get a job everything will be great. Jobs out here are very tough there's is alot of undercover age discrimination going on (im 48). In the meantime we are doing what we must do.

[sandra123]

Even though you're filing bankruptcy all secured debts have to be paid for or they can be in danger of foreclosure or repossession. Usually, in most districts they require the debtor to reaffirm any secured debts the individual is planning on keeping. In today's real estate market I would be leery about reaffirming a second mortgage as property values are continuing to decline. After filing bankruptcy you will have no recourse if you walk from the home. When you're in the process of filing bankruptcy, the automatic stays in place and your lenders will not speak to you until after the discharge. Your bankruptcy attorney could contact them and ask how to pay the payments. Whatever it is, you will still owe all the payments even though they have not been accepting them during the bankruptcy.

[tobee43]

Well with the Chap 7...I thought you had to reaffirm all secured dept to keep it...house, car....Our second mortgage is not in default.....nor our car payments....we just didn't pay the CC'rds and we missed 2 house payments....then went into restructuring .....I'm just trying to figure out what happens with my first mortgage once I receive my discharge.....should I expect Wells Fargo to start contacting me concerning the missed payment during the filing....or is that something that is covered when you file....

especially, not here in florida where the property values have dropped by over 70% in many areas and so many are under water...once you reaffirm you can never walk away...well you can, put at a possible high price to your pocket book. also possibly putting you deeper in debt than before the bk.

let's say your situation changes again and their is an illness or a job loss or even cut in pay, what then? florida is also a deficiency state, so if that does happen and you didn't list the house on your bk, the bank can come after you for the difference if down the road a change of your situation causes a foreclosure on your home.

i would do exactly like Valle suggests...amend your petition ASAP...do not stop...do not pass go...just make the changes.

just an added not btbeme: i do believe we will be seeing more "write-downs" in the future. the banks are too heavily loaded with inventory and nothing to show or gain other than to go back to the owners and work a deal.

[btbeme]

just an added not btbeme: i do believe we will be seeing more "write-downs" in the future. the banks are too heavily loaded with inventory and nothing to show or gain other than to go back to the owners and work a deal.

Lord, I hope so. I am not an idiot, yet I cannot wrap my brain around the "cons" for doing this. My very best formula for something like a write down would be something similar to a "city second" mortgage, where the city pays a portion of the downpayment in exchange for an absolute time limit before selling; say, they would contribute 5% of the purchase price toward purchase costs ad forgive that debt in increments every year until 5-10 years later when you owe then zero.

I'd really like to see principle reductions as a means to stay and pay. There has to be a creative and beneficial solution out there somewhere.