QUESTION
Is there a time when reaffirmation of a mortgage is necessary after bankrutcy?
Asked on Oct 26th, 2012 on Bankruptcy - California
More details to this question:
I need answer that would apply to the state of California. My bankrutcy discharge was granted in April 2012 and I was not aware that a reaffirmation was necessary even thought my Attorney knew I wanted to keep my house. This is secured debt and I said I would continue to pay my mortgage; the paper work reflected this. I have never had a late or missed a payment. My mortgage contacted me offering a refinance through the HARP program that would lower my interest rate and monthly payment. They stated that a reaffirmation was necessary for them to start the process. Is reaffirmation necessary in cases of a loan, death of mortgagee or sale of property?
4 ANSWERS
Criminal Law Attorney serving Fremont, CA
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Steven J. Alpers, A Professional Corporation
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You need to talk with your former attorney.
Answered on Jun 13th, 2013 at 2:06 AM
Your attorney is correct. A reaffirmation of your first mortgage is not necessary but so far no-one has been able to identify any actual harm in signing it. A reaffirmation is only "necessary" for the HARP loan modification because the bank says that it is. There is no legal requirement to reaffirm. If you reaffirm a second mortgage or HELOC then you are shooting yourself directly in the foot. This would be a profoundly bad idea.
Answered on Oct 27th, 2012 at 2:58 PM
Chapter 7 Bankruptcy Attorney serving Huntington Beach, CA
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Law Offices of Robert Parkinson Taylor
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It's too late to reaffirm your mortgage now. It's generally not a good idea to reaffirm a mortgage in a California Chapter 7 anyway (although there are rare exceptions). Most knowledgeable bankruptcy attorneys would consider it malpractice to recommend reaffirming a mortgage. While it is true it would normally be a violation of your bankruptcy discharge for your lender to contact you about restructuring, refinancing or modifying your home loan after bankruptcy, there are special laws allowing lenders to deal with you with regards to a HAMP modification or a HARP refinance. If your lender wont assist in a HARP refinance, it's because they choose not to do and not because they can't.
Answered on Oct 27th, 2012 at 2:54 PM
A reaffirmation is not "necessary" why do you think it's required? You never "have" to sign a reaffirmation and banks may re-negotiate loan terms with you without one. Further, after BK you still have no personal liability even with a loan mod. If you fall on hard times you can walk away from the new terms and the debt against you personally remains discharged. You'd lose the house of course, if you fail to make payments, but the bank would not be able to come after you for the secured debt already discharged. I never advise clients to reaffirm a mortgage. Most attorneys in the central district do not either. You've filed bk, as long as your payments remain current you should stay in your home and it should be yours at the end of the term. If you reaffirm it, you're putting yourself back on the hook for a discharged debt and you will have personal liability again if you fail to make payments and you can't file a Ch.7 for another 8 years. I have clients who sign loan mods after bk, after discharge, and without reaffirmations. Not up to date on new HARP requirements. Finally, why haven't you (or have you) reached out to your attorney about this? He/she should have the answers for you. Good luck!
Answered on Oct 27th, 2012 at 2:52 PM