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Loan mod after chapter 7 bankruptcy discharge. Is possible I could create a new liability or tax liability by modifying my home?

Riverside, CA |

Went thru BK last year. Low and behold, 10 mos after my discharge, the mortgage offers me a loan mod. What ramifications could there be if I sign? I didn't reaffirm the mortgage in any way during the bk

Mr. Walton hit my question on the head. Is it possible to RE-create liability post discharge where none exists now by entering into a loan mod on a discharged mortgage. They aren't asking me to reaffirm or anything. Just offering a Loan Mod to me.

Attorney Answers 4


The HAMP guidlelines do not allow the lenders to require reaffirmation in order to modify. And reaffirmation can only happen while your case is active. The modification will have not change the fact that your are not legally obligated to pay the money back as a result of the bankruptcy.

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As I understand your facts, you had your debts discharged in a Chapter 7 bankruptcy and did not reaffirm the debt on you home, the result of which is that you are no longer personally responsible for the debt.

Without actually seeing the loan modification agreement, it would be my belief that by entering into a loan modification post discharge that you are incurring new debt post discharge and would therefore once again be personally liable on the mortgage.

Having said this, you would have to weigh the advantages you might receive in lowering your monthly mortgage note against the fact that you will once again be responsible personally for the mortgage.

"Do It Yourself" bankruptcy filing is a really bad idea, so you should seek the advise of an experienced bankruptcy attorney to answer your questions. While the Bankruptcy Code is federal law, there are local procedures and forms. "Do It Yourself" bankruptcy filing is a really bad idea The information provided is not intended as legal advice. No Attorney/Client relationship is intended, implied or created.

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It could be considered post petition (after the filing) debt when you do a loan modification after a bankruptcy. Think of it as a new loan that modifies the terms of the old discharged loan. Even if the bankruptcy discharged the loan the signature on a fully executed loan modification is like making a new mortgage and the mortgage company theoretically could come after you for a default. They still have a valid lien on the property and must foreclose the lien because of the discharge, and the bankruptcy filing discharged you only personally for the debt. The tax liability issue is a more complex question. Hope this helps

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Answerers were all outside of California. (no offense guys)
No one mentioned California Code of Civil Procedure 580.
Go to local bankruptcy counsel and run through the scanarios.

Is there any chance that you coud enter into a BRAND NEW purchase with the California walk away provision for extra measure?

Curt Harrington Patent & Tax Law Attorney Certified Tax Specialist by the California Board of Legal Specialization PATENTAX.COM This communication is general information and not legal advice, and does not create an attorney-client relationship. This communication should not be relied upon as any type of legal advice. Please note that no attorney-client relationship exists between the sender and the recipient of this message in the absence of either (1) a signed fee contract and (2) remission of an agreed-upon retainer. Absent such an agreement and retainer, I am not engaged by you as an attorney, nor is any other member of my law firm.

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I looked at 580 and it didn't make much relevant sense to me. What does it say in a nutshell?

Curtis Lamar Harrington Jr

Curtis Lamar Harrington Jr


It defines parameters of California's "one action rule" regarding nonjudicial foreclosure.

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