12. Should I Reaffirm my Mortgage After a Chapter 7 Bankruptcy?

Some mortgage companies have been asking debtors to reaffirm their debt after filing a chapter 7 bankruptcy. What does this mean? Can you do this? Well, a reaffirmation agreement is a contract saying that you promise to repay a debt that would have been released in bankruptcy.  So, if you reaffirm your mortgage, it means you are promising to pay your mortgage despite the fact that the obligation to pay it has been released in bankruptcy.  Also, if you end up defaulting on the mortgage then your home can still be subject to foreclosure.

So why would you choose to reaffirm your mortgage?

First, it allows communication between you and your lender and allows you to keep your home as long as you make the payments under the terms of the reaffirmation agreement.

Second, after a bankruptcy some lenders will not report your mortgage payments to the credit bureaus unless you reaffirm the debt.

Third, when you attempt to reaffirm your mortgage debt with your lender, the lender may renegotiate the terms of the mortgage such as your interest rate.

How do you know whether or not you should reaffirm?

If you are current on your mortgage and can afford to pay it then as long as the jurisdiction in which you filed bankruptcy allow you to reaffirm the debt. On the other hand, if you are behind on your mortgage when you file bankruptcy  and you are not able to make your mortgage payments, then  you should not sign a reaffirmation agreement as the reaffirmation agreement will make you personally liable for the debt.

You should work with your bankruptcy attorney to analyze your situation and goals to decide whether you should reaffirm your debt taking into consideration whether you can afford to make the payment.

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Daniela Romero

Daniela Romero has been practicing law in the Los Angeles area since 1998. Ms. Romero has practiced in the areas of civil litigation, family law and bankruptcy law. She was also the staff attorney for the Los Angeles County Bar Association’s Domestic Violence Project. MORE

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