Exemption waiver on mortgage

[TRfromillino]

I'm getting ready to file chapter 7 BK and while reading over my mortgage last night, I noticed that there was a waiver from homestead exemptions at the very end. When I signed these papers long ago, I'm not really sure this was ever explained to me.

I hadn't planned to reaffirm my mortgage with the local bank and I'm not behind on my payments. I'm terrified now that they will use this waiver to block me from not doing the reaffirmation and it may be my only chance. My attorney is out of town this week, and I don't have anyone to ask about this. Can this happen, because if it does, then I need to be making some other plans..... Any advice would be appreciated! Thanks!

[TRfromillino]

Not one person has a response??

[Floridagail]

Welcome to the forum, I am not sure what the waiver on your mortgage would have to do with a bankruptcy, or would mean in your case, Best let the attorney explain that.
But I do know Banks do not want homes back, especially if the house is upside down as ours is. Our attorney recommended we not affirm anything our mortgage or cars. Pay and stay is his recommendation. I have read several forums in past 5 yrs during my bkprtcy and noone reaffirms their mortgages that I can remember. Too much can happen in future.
My Hubby is in process of chpr 7 now and it is stressful time worrying until it is over. So just relax and try not to worry. Hopefully you have a good attorney to guide you thru.

[TRfromillino]

thanks for your reply. What I took it to mean, was that if I filed bankruptcy, I couldn't use the homestead exemptions which covers the difference from the mortgage and the assessed value. I'm not underwater and my payments are current. If I don't get to use them, then I could be looking at a whole different picture. What a time for my attorney to go on vacation!

[Floridagail]

What State are you in. I am in Florida, Under the bankruptcy law, homestead protection is available in bankruptcy up to $146,450 unless the debtor occupied her current Florida homestead property and previous Florida homestead properties for a continuous 40-month period.
If your state had none, which I doubt, you could use federal.

That clause in your mortgage is to do with your mortgage, You are not late on it. You would still get the bankruptcy protection.

[justbroke]

This depends on the State in which you live. We would need to know the exact wording of this homestead exemption waiver. For example, the homestead exemption wouldn't apply to the lender anyhow. It may be for your homeowner's association, but even those are typically dealt with under State non-bankruptcy law (enjoying super-priority over all other things). I'm sure this is just boilerplate language to cover a very specific case.

I think you are totally misunderstanding what underwater means in a bankruptcy context. it just means that there is no equity. If you were to surrender the home, in bankruptcy, and the lender sold it for close to nothing, you'd still owe nothing; the so-called deficiency would be discharged in the bankruptcy. The homestead exemption has nothing to do with the discharge of debt itself. The homestead exemption is to protect you from creditors... other than any entity to which you pledged the property as collateral, such as your lender.

The homestead exemption also has nothing to do with a reaffirmation. Whether the lender will demand that you choose one of the 3 options, redeem, reaffirm, or surrender, is entirely up to the lender. There is no way to speculate on how the lender will respond. In most cases, at least 99% I would guess, the lender does not care if you don't reaffirm a home mortgage, so long as you are no in arrears. In rare cases have I read of a lender that pushed for a reaffirmation or a surrender.

[TRfromillino]

I am in Illinois. The Mortgage states as follows: #24 Waiver of Homestead. In accourance with Illinois law, the Borrower hereby releases and waives all right under and by virtue of the Illinois homestead exemption laws. It does sort of follow their guidelines for foreclosure, which I'm not even close to. I do have some equity left in my property and that's what I'm hoping to protect. I would be ok if allowed the homestead exemptions.

[justbroke]

I am in Illinois. The Mortgage states as follows: #24 Waiver of Homestead. In accourance with Illinois law, the Borrower hereby releases and waives all right under and by virtue of the Illinois homestead exemption laws. It does sort of follow their guidelines for foreclosure, which I'm not even close to. I do have some equity left in my property and that's what I'm hoping to protect. I would be ok if allowed the homestead exemptions.

You can't protect equity in a foreclosure. It's just standard business and is probably why #24 is there. The paragraph #24 is moot anyhow as it reads that Illinois law exempt the morgagor (lender) from your claim of homestead. Otherwise, they'd have a tough time foreclosing.

[TRfromillino]

I guess what I am asking is, when I file bankruptcy will I be able to use the 15K homestead exemption for my house or does that waiver wipe that out? Or is the waiver more for if they were going to foreclose? Or am I still not understanding it all?

[justbroke]

I guess what I am asking is, when I file bankruptcy will I be able to use the 15K homestead exemption for my house or does that waiver wipe that out? Or is the waiver more for if they were going to foreclose? Or am I still not understanding it all?

The homestead exemption does not protect you from a.) the lender that holds your mortgage, b.) any taxing authority, c.) your homeowner's/condominium association (based on State non-bankruptcy law), or d.) anyone you granted a consensual lien upon your home.

The homestead exemption really only protects you from unsecured creditors. Think of the homestead exemption like this. If you owed $20K on your Chase credit card and Chase sued you, they could force the sale of your home, but you would get $15K of the sale before they would get their proceeds. in fact, they'd be third in line. First your lender would be paid, then you get your homestead exemption and then Chase. Since your home is underwater, they would get nothing and it would be of no use to them to force a foreclosure on the property. (In Florida, we have an unlimited homestead exemption so no unsecured creditor could ever claw at your equity in a property.)

Do you understand this better or did I make it worse?

[TRfromillino]

I finally get it now, thanks! I really thought that waiver would wipe out everything that is protection for me! Perhaps now I can calm down a little. What it means on my mortgage papers that if I was just going into foreclosure instead of bankruptcy, the bank would hold me liable for any deficiancy from, say, a short sale. Or if it didn't sell for enough to pay the mortgage off. (Hopefully I understand that right? lol!) Thank you so much!

[justbroke]

Yes, now you understand!