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Do you recommend re-opening a bankruptcy to re-affirm a mortgage and save home? What repercussions does this have??

Boston, MA |

I am thinking about letting an attorney re-open a bankruptcy that was discharged in 2008 so I can reaffirm my loan and save my house from foreclosure. I have been trying to modify my existing mortgage for 2 plus years but just found out the bank has no intentions of ever permanently modifying us because the loan doesn't "exist" since its been included with the bankruptcy. I am wonder what the repercussions would be by doing this? We would like to keep the home but I want to make sure we are making the right decision financially as well. Trying to do the right thing.

Correction: The attorney wants to file a new chapter 13 bankruptcy (I believe) and do a reaffirmation agreement.

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Attorney answers 8

Posted

Pursuant to the Bankruptcy Rules, reaffirmation agreements must be filed within 60 days after the date first set for the first meeting of creditors.

Asker

Posted

Thank you Scott but I am confused. Are you saying this cannot be done? The attorney told me they would re-open the bankruptcy and change it to a chapter 13 and re-affirm the home loan? Can this even be done? I really don't want to pay a lawyer if this is just a scheme to get more money from us.

Scott Benjamin Riddle

Scott Benjamin Riddle

Posted

Your comment completely changes the scope of the question. I believe you can amend your questions so other lawyers can easily see the issue about conversion to a Ch. 13 (they may not read the comment). My response is that you should get a second opinion - converting to a Ch. 13 two years after discharge? Far fetched, puts it mildly.

Scott Benjamin Riddle

Scott Benjamin Riddle

Posted

To get to your actual question, the Rules clearly have a time limit for reaffirmations in a Ch. 7 case. I expect that is why the "idea" of converting came up.

Gary D. Bollinger

Gary D. Bollinger

Posted

Even if the court allowed the case to be re-opened, the lender is not required to agree to a Reaffirmation Agreement.

Posted

Attorney Riddle's response basically means re-opening your case will NOT allow you to re-affirm the debt.

Additionally, I have dealt with a number of persons post-bankruptcy who have obtained loan modifications. Perhaps there is "something special" about Massachussetts, but I don't think so.

Loan modifications are not just "out there for the taking." Very, very few people ever get loan mods. I don't know the ratio exactly (and I don't think Obama wants anyone to know), but the ratio is probably less than 10% of those who apply ever get a permanent modification. Loan mods are political pie in the sky designed for several reasons, but not really to help homeowners.

The bottom line is this: The bank very well could modify a loan for which personal liability has been discharged, IF IT WANTS TO. Even if you could, I don't think re-affirming the debt would change their answer.

No one can be an expert in everything. Everyone needs the advice and help of experts in other fields at different times. The consequence of Do-It-Yourself surgery should be obvious. The consequence of Do-It-Yourself Law may not be as obvious, but very well could be as disastrous as self surgery. You need expert advice that is beyond the scope of what can be offered in this forum. You need to find a competent, local expert bankruptcy attorney to explain to you what your rights and responsibilities and options are now. Maybe a Chapter 13 would help get you back on track?

Good luck.

If you need further clarity, please email me at MICHAEL@MIRELAND.US Answers to questions are for general information purposes only and do not establish an attorney-client relationship. This is not legal advice, simply information. You SHOULD NOT act on this information without consulting a competent bankruptcy attorney in your area and providing ALL relevant information.

Posted

While it may be possible to reopen your old bankruptcy for the purpose of reaffirming on your home, it is almost certainly unwise. The bank did not deal truthfully with you before. The bank will not suddenly change its stripes now.

Instead, find yourself an experienced Chapter 13 Bankruptcy attorney. Look for an attorney that advertises for Chapter 13 cases. A chapter 13 could be just the thing to put your house right. Good luck.

This answer is not intended to create an attorney-client relationship and may not be relied upon as legal advice. A careful examination of the facts is necessary before a legal answer may be relied on. You should consult your own attorney before taking or refraining from any legal action.

Diane L Gruber

Diane L Gruber

Posted

In the District of Oregon, the BK court will NOT re-open for purposes of reaffirming a debt. More importantly, can you trust the mortgage holder to draft a reaffirmation agreement for your signature? I doubt it.

Charles Ross Smith III

Charles Ross Smith III

Posted

Our Bankruptcy Court in Toledo MIGHT re-open such a case. But the Court would probably question the attorney's judgment and would almost certainly refuse to approve the reaffirmation.

Diane L Gruber

Diane L Gruber

Posted

Interesting. So the debtor just wastes his re-opening fee! Before we file re-opening documents with the court, I check with the court about whether or not what I want to accomplish will actually be done, such as removing a judicial lien on real property.

Charles Ross Smith III

Charles Ross Smith III

Posted

An excellent rule to follow. As I have learned, to my sorrow on at least 2 occasions. Call first. Then file.

Asker

Posted

Thank you for all your answers. As you can imagine, this has been an stressful situation. As of today we have 2 separate sets of documents from our lender telling us we have been approved for a home modification. Getting them to actually credit the payments we have made to them in the past 3 years is another story. I can't imagine why the bank doesn't want us to keep the home. After all we are the idiots that are going to pay far more for than home is actually worth (or ever will be for that matter). You think they wouldn't want the property to sit and rot?

Posted

Short answer - NO. I suspect most judges would refuse to allow it anyhow, since you would have had to reaffirm the debt before it was discharged.

Posted

This is WRONG and will not help you. Also, you cannot Reaffirm a debt after you receive your discharge. Don't let them reopen your case.

Posted

As has been stated by others, it is likely too late to enter into a reaffirmation agreement (without even getting into whether that is a wise course of action and whether or not that will lead to the loan modification you are seeking). Another option that has not been discussed is the possibility of filing a Chapter 13 bankruptcy to stop the foreclosure action. You should consult with an experienced bankruptcy attorney to discuss that possibility.

Asker

Posted

Thank you. We met with a bankruptcy attorney today and we have decided to open a chapter 13 in order to save the home from foreclosure. We also are seeking litigation to find out what has happened to payments (around $50,000) have gone to. Our lender has yet to explain were the funds have gone. With that being said; we are hoping to bring the mortgage current by getting the payments credited and we will pay back the arrearages in agreement pursuant to the chapter 13 agreement between 3-5 years. We hope this works and ends the nightmare we have been enduring. Thanks for all your help!

Posted

Mr. Ravosa has suggested an interesting line of inquiry and it cannot hurt to explore this option. In my opinion, even if you reopened the Chapter 7 it is unlikely you would be able to reaffirm a debt that is not contractually current. Chapter 13 would be the only vehicle to stop a foreclosure and may, then, give you some breathing space to negotiate with the mortgage company.

Posted

You have already learned from several attorney answers that you may not reaffirm the mortgage note that has been discharged in your Chapter 7 bankruptcy case because the time limit has passed. You can certainly file a Chapter 13 case to respond to a pending foreclosure but that filing will only allow you to address arrears without changing the terms of your mortgage. I have recently received client complaints that lenders will not modify mortgages in cases in which the note was not subject to a reaffirmation agreement. In my opinion, this may be an unfair and deceptive act or practice in violation of MA consumer protection laws. You should talk to a litigator about this matter. While I think it is a novel issue, it might be worth a discussion while you consider your options.

This response should be viewed as general information and not legal advice. No attorney client relationship is established by responding to questions on this website and you should consult with your own counsel.