Should I re-affirm home loans when in Chapter 7? 24 Answers as of June 26, 2013

Should I reaffirm the loan? The house is worth about $513K and the first loan is around $700K, second loan is $157K. I'm currently in a Chapter 7. The letter specifically says that my responsibility to pay is discharged when the case discharges, but what does that mean? Could I remove the lien in Chapter 7? Or should I file a Chapter 13 after filing the 7? Further info: I don't have a job and EDD payments are on appeal, so I really don't have a viable source of income. I have 4 young children and my husband receives disability.

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Eric J. Benzer, Attorney at Law
Eric J. Benzer, Attorney at Law | Eric Benzer
No
Answer Applies to: Maryland
Replied: 8/6/2011
Eranthe Law Firm
Eranthe Law Firm | Cate Eranthe
Do not reaffirm the loan. If you want to stay in the house continue to make the payments. If you can't make the payments the lender will eventually foreclose on the property. After the bankruptcy your personal liability is discharged. This means if the property is foreclosed and sold for less than the mortgages you will not be liable for the deficiency. If you reaffirm the loan and lose the house you will owe any deficiency. The home loan then is treated as if you never filed for bankruptcy. You cannot remove the lien in a chapter 7. With no income you do not qualify for a chapter 13 and could not fund a plan. If your situation changes in the future a chapter 13 might become an option.
Answer Applies to: California
Replied: 8/5/2011
Janet A. Lawson Bankruptcy Attorney
Janet A. Lawson Bankruptcy Attorney | Janet Lawson
NEVER reaffirm mortgages. The code does not require it. You can only be in Ch13 if you have the ability to make the mortgage payments plus the plan payment (the amount needed to catch up). You can strip off the second in Ch13, but it doesn't sound like you can afford the house.
Answer Applies to: California
Replied: 8/5/2011
Bird & VanDyke, Inc.
Bird & VanDyke, Inc. | David VanDyke
Converting your ch 7 to a ch 13 does not appear to be an option as you have no regular income. I would advise NOT to reaffirm the house loans, especially the second loan. You can only strip the second mortgage lien if you file a ch 13. With a ch. 7 only your personal responsibility for the loans are discharged but the lenders still have the recorded liens for the debts on your home.
Answer Applies to: California
Replied: 8/5/2011
Burnham & Associates
Burnham & Associates | Stephanie K. Burnham
You cannot file a Chapter 13 after receiving a Chapter 7 discharge unless you wait 8 years. You should speak with an attorney immediately to get specific advice and to protect you.
Answer Applies to: New Hampshire
Replied: 8/5/2011
    CONSUMER PROTECTION ASSISTANCE COALITION, INC. (DE).
    CONSUMER PROTECTION ASSISTANCE COALITION, INC. (DE). | Gary Lee Lane
    If you want to keep the home.
    Answer Applies to: California
    Replied: 6/26/2013
    Judith A. Runyon, Esq. Attorney at Law
    Judith A. Runyon, Esq. Attorney at Law | Judith A. Runyon
    Absolutely not!
    Answer Applies to: California
    Replied: 8/4/2011
    R. Steven Chambers PLLC | R. Steven Chambers PLLC
    If you don't pay after your Chapter 7 discharge, all the bank can do is foreclose on the house. The deficiency that will exist, approximately $344,000 ($513,000-$700,000-$157,000) will be discharged, meaning you have no responsibility to pay it. If you reaffirm then you become responsible for any deficiency just as if you had not filed bankruptcy. You cannot remove the lien in Chapter 7.
    Answer Applies to: Utah
    Replied: 1/21/2013
    Indianapolis Bankruptcy Law Office of Eric C. Lewis
    Indianapolis Bankruptcy Law Office of Eric C. Lewis | Eric Lewis
    If you don't have viable income that you can count on to sustain your mortgage, it would not be wise to reaffirm your personal liability on it.
    Answer Applies to: Indiana
    Replied: 8/4/2011
    Theodore N. Stapleton, PC
    Theodore N. Stapleton, PC | Theodore N. Stapleton
    You need to surrender the house and discharge the debt do not reaffirm you are too far underwater.
    Answer Applies to: Georgia
    Replied: 8/4/2011
    Melinda Murphy Dionne, PC
    Melinda Murphy Dionne, PC | Melinda Murphy Dionne
    Under the facts you have provided I would advise against reaffirming on the debt on the first and second mortgages. Reaffirming the debt means you sign documents agreeing to continue to pay the debt. If you reaffirm, you will be liable for the debt after your bankruptcy case. In other words, it would be as if you never filed Chapter 7 as to the mortgage debt. You indicated that you had no income. If this is true, you are not eligible to file for relief under Chapter 13. Lien stripping is not available in a Chapter 7 case. You can only strip a lien in a Chapter 13 case.
    Answer Applies to: Alabama
    Replied: 8/4/2011
    Law Office of Lynnmarie A. Johnson
    Law Office of Lynnmarie A. Johnson | Lynnmarie Johnson
    I never have a client reaffirm mortgages. Simply keep making your payments, that way if you decide down the line that you can't afford to keep the house, you have already discharged your obligation and don't have to worry about being held responsible for the deficiency. You cannot strip a mortgage in a Ch 7, so you cannot eliminate the liens on the house. You cannot really file a CH 13 because you don't have a viable current income from which to make the payments. If you get some kind of settlement from your case, you might try seeing if your second will settle for a much lower amount if you just pay them off. They know they really have no equity and that you will probably at some point be able to do a 13 and they will get nothing. The worse they can say is no! Good luck!
    Answer Applies to: Michigan
    Replied: 8/4/2011
    Dearbonn Law Offices
    Dearbonn Law Offices | Ajibola Oluyemisi Oladapo
    if you do not re-affirm your home loans, you run the risk of losing your home. Please note that this is not legal advise and should not be construed as such.
    Answer Applies to: Washington
    Replied: 8/4/2011
    Colorado Legal Solutions
    Colorado Legal Solutions | Stephen Harkess
    You cannot get a discharge of debts in a Chapter 13 filed within six years after the filing of a Chapter 7 in which you receive a discharge. Because of this, most judges will not allow a lien strip in a subsequently filed Chapter 13. This varries depending on the judge, so you will want to discuss your case with your attorney to determine how to proceed.
    Answer Applies to: Colorado
    Replied: 8/4/2011
    The Schreiber Law Firm
    The Schreiber Law Firm | Jeffrey D. Schreiber
    The bankruptcy discharges your liability on the note, which means you no longer have a loan and no obligation to pay the lender. However, if you do not pay them, they can foreclose as the lien remains on the property after your Chapter 7 is over. It is most likely not in your best interest to reaffirm, and many Judges will not approve a reaffirmation on a home loan, especially where you have negative equity as you can become liable for the entire amount and lose your anti-deficiency rights if you fail to make the payments in the future (which is a right where a lender cannot sue you if a foreclosure occurs) All that remains after bankruptcy is the lien which is not removed by the Chapter 7. It is possible to strip the lien of the second in a Chapter 13, but that is not available after you have filed a Chapter 7 and received a discharge.
    Answer Applies to: California
    Replied: 8/4/2011
    Bankruptcy Law office of Bill Rubendall
    Bankruptcy Law office of Bill Rubendall | William M. Rubendall
    When you file bankruptcy and own a home your personal obligation to pay the loans is discharged. This doesn't mean you can keep the home without paying for it. The lender retains its security interest in the property and, in effect, you still owe the entire debt. This is true for chapter 7 and chapter 13. Sometimes you can strip an under secured junior lien in chapter 13. Consult with an attorney for details.
    Answer Applies to: California
    Replied: 8/4/2011
    Law Office of Maureen O' Malley
    Law Office of Maureen O' Malley | Maureen O'Malley
    NO.
    Answer Applies to: Virginia
    Replied: 8/4/2011
    Carballo Law Offices
    Carballo Law Offices | Tony E. Carballo
    I hope you have a lawyer that can advice you. Generally, real estate loans should never be reaffirmed, particularly if you are under water/upside down on the property. Real estate loans (mortgages or deeds of trust) are protected by liens on the property and the liens are not affected by Chapter 7. If you don't pay then the bank can still foreclose to get its money from the sale of the property. Maybe you should have filed a Chapter 13 to strip off the second mortgage but that depends on your income because you must be able to pay the first mortgage. Those are decisions that should be made before you file in consultation with a bankruptcy attorney. You might still be able to convert your case to Chapter 13 but, again, that is something that requires advice from an experienced bankruptcy attorney. You can file a Chapter 13 after the Chapter 7 but in some districts you might not be able to strip off the lien of the second mortgage from the house title or the case may be considered a filing in bad faith and dismissed.
    Answer Applies to: California
    Replied: 8/4/2011
    Ursula G. Barrios Law
    Ursula G. Barrios Law | Guillermo Machado
    We never advise reaffirming home loans. Just pay house and as long as bank accepts (and they do),that should suffice. Thank you,
    Answer Applies to: California
    Replied: 8/4/2011
    Ashman Law Office
    Ashman Law Office | Glen Edward Ashman
    Your post tells me that you made the horrific mistake of filing pro se, and you need a lawyer ASAP before you make the mistake of your life. 99.9% of the time home loans should not be reaffirmed. There are rare cases where, because of things your attorney negotiates that go beyond normal modifications, where you may see an exception. The lien of a home loan is NEVER removed in a 7. Liens are sometimes stripped in 11s and 13s but absent an income you might not be able to do a 13. I don't know what letter you are talking about but the decisions you make about a home will affect whether you still must pay the home, can pay it, or lose it. And your question tells me you have no concept of what you should do and how to do it. Pro se cases almost always end up costing people more than they think they saved in lawyers fees.
    Answer Applies to: Georgia
    Replied: 8/4/2011
    Ryan Legal Services, Inc.
    Ryan Legal Services, Inc. | Kevin Ryan
    With your husband on Disability and you having no income, signing a Reaffirmation Agreement would be the worst mistake you could make in this process. Either way, whether you sign one of those or not, your Mortgage (Security) Agreement with the lender is not affected by the bankruptcy discharge and if you are delinquent as far as the monthly payments they can foreclose on their lien. If you do not reaffirm the debt and get a bankruptcy Discharge, they cannot collect the deficiency balance from you post foreclosure. Also, there would be no income tax liability relative to the bank writing off its losses and issuing you a 1099. You would file IRS Form 982 in that instance to let the IRS know you were insolvent relative to that transaction.
    Answer Applies to: Ohio
    Replied: 8/4/2011
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