Are we liable for the deficiency on the house sale after bankruptcy? 11 Answers as of May 17, 2011

We 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?

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Burnham & Associates
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
Replied: 5/17/2011
Janet A. Lawson Bankruptcy Attorney
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
Replied: 5/13/2011
Cohen & Kendziorra, P.A.
Cohen & Kendziorra, P.A. | Robert S. Cohen
You are personally liable only if the bank pursues a deficiency claim. Once you reaffirmed the note on the home, you became personally liable on the mortgage.
Answer Applies to: Florida
Replied: 5/13/2011
Bankruptcy Law office of Bill Rubendall
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
Replied: 5/13/2011
Law Offices of J. L. Haddock, PLLC
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
Replied: 5/13/2011
    Bankruptcy Law Office of Robert Weed
    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
    Replied: 5/13/2011
    The Schreiber Law Firm
    The Schreiber Law Firm | Jeffrey D. Schreiber
    You agreed by the reaffirmation agreement to continue to be legally liable for the debt despite the bankruptcy discharge.
    Answer Applies to: California
    Replied: 5/12/2011
    Law Office of L. Paul Zahn
    Law Office of L. Paul Zahn | Paul Zahn
    You might. The main reason to not reaffirm the debt is that you would not be liable for a deficiency judgment.
    Answer Applies to: California
    Replied: 5/12/2011
    Indianapolis Bankruptcy Law Office of Eric C. Lewis
    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
    Replied: 5/12/2011
    Benson Law Firm
    Benson Law Firm | David Benson
    It depends on your local law on the subject. Here in Ohio, a deficiency judgment is good for two years only. In many cases, the lender does not pursue the deficiency and the judgment lapses.
    Answer Applies to: Ohio
    Replied: 5/12/2011
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