Are we liable for the deficiency on the house sale after bankruptcy? 11 Answers as of May 17, 2011We reaffirmed our mortgage when we filed chapter 7. The bank recognizes the reaffirmation. We have a modification that was done previous to the bankruptcy and this is our original loan. If we decide to walk away, will we be liable for the deficiency on the sale of the house?
Burnham & Associates | Stephanie K. Burnham
Yes, you may liable. Re-affirming a debt in Bankruptcy is a MAJOR decision. It is as if the Bankruptcy never happened as to the mortgage - causing you to maintain personal liability. Your mortgage company may not come after you in light of the programs that are currently in place, but they could. Not only could you face a deficiency judgment, but you also could be liable for taxes on the forgiven amount. This year, the IRS is forgiving taxes that would otherwise be owed on forgiven mortgage debt, but there is no guarantee they will do the same next year. You should speak with an attorney immediately.
Answer Applies to: New Hampshire
Janet A. Lawson Bankruptcy Attorney | Janet Lawson
It makes me crazy when lawyers sign those things. There is no requirement under the code to reaffirm on real property. I do not know which state you are in, check with a lawyer in your state knowledgeable about bankruptcy. State law varies on the viability of the note. You have a defense to it, (technically called, "lack of consideration.").
Answer Applies to: California
Bankruptcy Law office of Bill Rubendall | William M. Rubendall
Formal reaffirmation requires approval by the bankruptcy judge. It is almost always inadvisable to reaffirm a mortgage since the lender retains a security interest whether or not it is reaffirmed. The impact of a reaffirmation agreement is that it is as though you never filed bankruptcy on the debt. In the event of default the creditor can sue for a deficiency unless there is a statute such as a residential anti-deficiency law. These is a serious issue and you should seek the advice of an attorney who is a certified specialist in bankruptcy law. Consult the State Bar for a listing of those attorneys in your area.
Answer Applies to: California
Law Offices of J. L. Haddock, PLLC | Jared L. Haddock
This is a good question and very timely with everything happening right now in the real estate market. The reaffirmation agreement filed with the court during your bankruptcy case is binding. You have until sixty days after your discharge to rescind the reaffirmation agreement for any reason. If you do not do so, then in certain jurisdictions (Michigan among them, by the way), you may be held liable for the deficiency balance (calculated by using the amount agreed to on the reaffirmation agreement). I hope this information helps.
Answer Applies to: Michigan
Bankruptcy Law Office of Robert Weed | Robert Weed
I hope you didn't reaffirm your mortgage. I have never had a client that reaffirmed a mortgage, for exactly this reason. I hope you are wrong about that. Check careful with the bankruptcy court. Maybe there's some mistake.
Answer Applies to: Virginia
Indianapolis Bankruptcy Law Office of Eric C. Lewis | Eric Lewis
Yes, the reaffirmation acts to make the loan survive just the same as you if you did not file bankruptcy.
Answer Applies to: Indiana