Did You Reaffirm Your Mortgage?

I saw something in Court a couple of weeks ago that I see all too often, a lawyer asking a Judge to allow the Chapter 7 bankruptcy debtor toreaffirm a mortgage.

This case involved a second mortgage, and the debtor had already reaffirmed the first mortgage.

Malpractice!

Yikes, I wonder what people are thinking.

Reaffirmation is the only way the law provides to keep you personally liable for a debt.

So, if you reaffirm in your Chapter 7,  and later the loan is foreclosed, you are on the hook for any unpaid balance that is still due and owing to the bank.

Maybe the lawyers think their clients have to reaffirm to keep the house.

Not so!

Certainly not in Michigan, foreclosure law is state law, so check with a lawyer licensed in your state, but, if you keep making the payments, and keep insurance, and pay the taxes, there will be no foreclosure.

The mortgage companies have too many houses already; they do not want more.

And homes in Michigan continue to decline in value, and probably will keep doing so for, as they say, the foreseeable future.

Over half the homes in Michigan, that have a mortgage, are underwater.

So why would you sign a paper that keeps you liable on what is probably your biggest debt?

A debt that is likely to grow, even as you continue to make payments?

What I mean is, the value of your home will probably go down faster than the principal gets reduced by your payments.

Reaffirming a second mortgage makes even less sense.

The second cannot get your house unless they pay off the first.

Not likely that will happen.

In my view, if you reaffirmed in a Chapter 7, and you get sued by that bank after your bankruptcy, you have grounds for a malpractice suit against your bankruptcy lawyer.

Did You Reaffirm Your Mortgage?

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3 Responses to Did You Reaffirm Your Mortgage?

  1. Can a second mortgage co. reaffirm their interest in a property, without the debitor’s knowledge, after a chapter 7 bankruptcy? If the house is sold by a bankruptcy trustee (in MI), will the amount that it sells for first pay off the 1st mortgage, and then pay off the 2nd and any other creditors?

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