Consumer debtors routinely have various related difficulties with mortgages following the filing of a Chapter 7 bankruptcy. Unfortunately, the first thought is that the bankruptcy attorney messed up when that really is not the case. They think the attorney put the home into the bankruptcy when it was meant to be left out. However, all debt and assets must be listed and included for disclosure purpose in a bankruptcy. Debtors who want to keep their home, have a choice to reaffirm the debt by signing a Reaffirmation Agreement or by simply continuing to make monthly payments. In most cases, it is advantageous for a debtor not to reaffirm a mortgage debt, but rather just continue to maintain payments, particularly when the home is under water and no equity exists in the property. If they reaffirmed the debt and eventually had to give up the house because they moved to take another job for instance, they would be back on the hook for the mortgage debt.
So what kind of problems come up when a debtor does not formally reaffirm the debt in bankruptcy, but their intention is to keep the property and continue making payments:
- Whether or not a reaffirmation of a mortgage is required
- When it is advantageous to reaffirm a mortgage
- Whether mortgage statements will be sent absent a reaffirmation
- Whether loan modifications are available absent a reaffirmation
- Whether refinancing with the same lender is possible absent a reaffirmation
- Whether mortgage payments will be reported to credit bureaus
The National Association of Consumer Bankruptcy Attorneys (NACBA) has been extensively involved with the Consumer Finance Protection Bureau (CFPB) in an effort to implement new mortgage servicing rules addressing this hopefully later this year on these issues. Right now, it may be best to consult with an attorney who is familiar with these problems and the terminology that is used in both bankruptcy and foreclosure to try and get to the bottom of the problem and find a solution. There are ways to get around these roadblocks that an attorney will be able to help. This includes getting the mortgage payments recorded on your credit, getting the mortgage company to send you statements and finally getting a loan mod approved. For more information, please contact Christie D. Arkovich, P.A.