Reinstated Mortgage Can I Fall Behind Again
If you own a home and file for Chapter 7 bankruptcy, your lender might enquire y'all to sign a reaffirmation agreement. Here's what it ways, and why you may desire to call back twice.
When you file for Chapter vii bankruptcy, your personal responsibility for paying your mortgage will be wiped out.
That doesn't mean your mortgage disappears, still. What it does mean is that your can't be held responsible for any shortfall if you fall behind and the lender sells the belongings at a loss.
In California, y'all can't be held liable for the shortfall on a first mortgage anyway. But in New York as well equally elsewhere, without a bankruptcy belch the lender could sue you for the deficiency.
Confused? You're not alone.
Home Loans – Two Obligations
When you take out a mortgage, you're actually doing 2 things: signing a Promissory Note and a Mortgage (which in some places is chosen a Human activity of Trust).
The Promissory Note is a document that obligates you lot to repay the debt with involvement over time, spelling out your rights and responsibilities.
The Mortgage, however, is but a certificate that serves as a lien confronting your holding. It's filed equally a public record so that you can't sell without satisfying the Promissory Notation.
More than to the point, it is the Mortgage that the lender volition use to foreclose on the belongings in the issue that you neglect to live up to your obligations nether the Promissory Annotation.
Chapter 7 Bankruptcy Affects But One Document
When you file for Chapter vii bankruptcy and become a discharge, your personal responsibilities under the Promissory Annotation are wiped out.
The Mortgage, however, remains unaffected. The lien stays against your belongings, and the lender will employ it if you don't brand your payments.
In that fashion, you're all the same sort of liable on the Promissory Note. If you don't care about keeping the belongings, don't make payments. But if you desire to go along it, you lot demand to keep sending your coin.
Reaffirmation – A New Promise to Repay
Rather than voluntarily making payments on the mortgage after you lot file your Chapter 7 defalcation case, you or your lender may look at a process called reaffirmation.
Reaffirmation is a legal term, but it loosely means a new promise to repay a debt after defalcation that otherwise would be wiped out. You lot and the lender sign an agreement that's approved by the bankruptcy judge, and it becomes binding on yous after your case is completed.
See too:
- Options For Keeping Your Car, Home And Property After Affiliate 7 Bankruptcy
The agreement may also signed by your bankruptcy lawyer if you've got 1, but that'southward not necessary. Your lawyer's signature may quicken the process by eliminating the need for court approval, but lots of lawyers won't sign them (for instance, I exercise non sign reaffirmation agreements).
In addition, a fair number of bankruptcy judges won't sign a reaffirmation agreement because it's not necessary in gild for yous to keep the holding.
If you're hellbent on reaffirming the mortgage, be prepared to face some tough questions in your quest to convince the judge that it's a adept idea to do so.
Why You May Care About Reaffirming Your Mortgage
If you discharge your personal liability to the mortgage visitor in Chapter 7 bankruptcy, they may not allow you refinance with them in the future. But you lot do realize that at that place are lots of other banks out at that place, right?
After yous discharge your mortgage obligations, the lender isn't allowed to report your payments to the credit reporting agencies. Of form, in that location are other ways to prove to the world that yous've been making your payments.
Aside from those two reasons, I take no idea why yous'd want to reaffirm a mortgage debt. After all, y'all're all the same allowed to pay the mortgage afterward bankruptcy,
See also:
- How Your Mortgage Shows Up On Your Credit Report After Bankruptcy
- Paying Debts Afterward Bankruptcy
How Long You Accept To Reaffirm A Debt
A reaffirmation understanding must be signed by both parties and approved by the bankruptcy court before the discharge is entered.
In one case the belch is entered, the bankruptcy approximate doesn't have the authority to sign the agreement.
If y'all're going to do it, best to become the procedure started every bit before long as the case is filed.
What If You Desire To Reaffirm Afterward Bankruptcy?
Yous can't reaffirm your mortgage once the bankruptcy case is over without jumping through some additional hoops.
You're going to need to brand a motion to the bankruptcy court to reopen your case for the express purpose of entering into a reaffirmation agreement.
Some courts will allow you lot to practice so, others will non permit information technology.
A Tool For Limited Utilize Merely
Reaffirmation is seldom a practiced idea, and for a mortgage it tin can be a downright stupid one.
That said, I'yard sure there are some situations that phone call for reaffirmation of a mortgage. I don't think I've seen one in nearly 19 years of practicing bankruptcy law, simply there's always a new twist to be considered.
If you're looking to go downward the reaffirmation rabbit hole, talk with your lawyer first. If you filed for Affiliate 7 defalcation on your own, this would be a good time to sit down down with an attorney if only to review your options with respect to the mortgage.
Source: https://www.consumerhelpcentral.com/can-you-reaffirm-a-mortgage-after-bankruptcy/
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