Debt Collection, Garnishment, Repossession Article


Mortgage Reaffirmation Requirements Bogus

When a homeowner files for bankruptcy there is most likely a lender on the home involved. Once the discharge of the debts is entered by the Bankruptcy Court then borrower is no longer personally liable for the debt. But, if the borrower wants to keep their home they will need to pay the regular monthly payment because there is a lien or security interest in the real property. Some lenders will ask the borrower to sign a reaffirmation agreement after the bankruptcy is filed. This reaffirmation agreement will give the lender the right to sue the borrower if there is a later default.

Some states have laws that protect their homeowners called no-recourse or anti-deficiency statutes. For instance in Arizona a house homeowner cannot be sued after a trustee’s sale is completed so long as the property fits into a certain description: 2 1/2 acres or less, utilized and occupied as a one or two family residence. Therefore, even if an Arizona homeowner signs a reaffirmation agreement they will be not be liable on a first position deed of trust (probably not true for a junior deed of trust). Having said that the judges in Arizona will not sign reaffirmation agreements on residential property. They take this position in order to protect the naive homeowner who is being bullied by the lender into signing a reaffirmation agreement.

Reaffirmation agreement becomes effective upon filing with the Court if represented by an attorney and not presumed an undue hardship. Per the reaffirmation agreement language set out in the Code, “…No court approval is required if your reaffirmation agreement is for a consumer debt secured by a mortgage, deed of trust, security deed, or other lien on your real property, like your home.” § 524(k)(3)(J)(i)7.

Many lenders will state that they cannot refinance a mortgage loan because the loan was not reaffirmed in the bankruptcy. But, any lender has the right to refinance any loan, assuming no federal or state prohibitions. Instead the lender blames the borrower’s attorney. Stating that the attorney did something wrong. In Arizona this is a bold faced lie.

Many programs will refinance once a bankruptcy is completed. For instance -Borrowers who have received a Chapter 7 bankruptcy discharge in a case involving the first lien mortgage who did not reaffirm the mortgage debt under applicable law are eligible for certain programs, depending on the type of loan. According to one expert “The following language must be inserted in Section 1 of the Home Affordable Modification Agreement: “I was discharged in a Chapter 7 bankruptcy proceeding subsequent to the execution of the loan documents. Based on this representation, Lender agrees that I will not have personal liability on the debt pursuant to this Agreement.” ” Accord, In re Bellano, 456 B.R. 220, 224 (Bankr. E.D. Pa. 2011); In re Owens, 10-72509, 2013 WL 4052874 (Bankr. W.D. Va. Aug. 9, 2013) (“…the lack of a reaffirmation agreement with the Bank and the issuance of the discharge to the Debtor do not appear to preclude the latter even now from filing an application under the HAMP program.”); In re Pope, 10-19688-RGM, 2011 WL 671972 (Bankr. E.D. Va. Feb. 17, 2011) (Finding that a lender’s requirement of reaffirmation as a condition precedent to consideration of a loan modification was improper).

My point – your lender is not your friend when it comes to reaffirmation agreements. Talk to your attorney, get good legal advice in order to determine the law and your rights. Talk to the folks at www.makinghomeaffordable.gov. Talk to other lenders. This is an area of law that is changing every day. Do not fall into the trap of assuming a “no” today will still be a “no” tomorrow.

Contributing Attorney: Diane L. Drain is an Arizona bankruptcy attorney at the Law Office of D L Drain.  



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QUESTIONS

  • My wife and I were sued for unsecured debt. We have two minor children that both have a bank account with my wife on each. The creditor seized thier accounts. My daughter has a babysitting job she does, and my son's account was set up to recieve his student financial aid. Luckily, he had already purchased books and payed for his summer classes. I have heard that Federal student aid was exempt from this. What can we do to stop this and can we get our sons school money back?
  • I owe a credit union in Michigan $25,000 for Visa and $175,000 for second mortgage. They wrote the balances off 12/30/2010. I continued to make payments on the mortgage thru May-2012. I have not received any communications from the credit union since then. In June 2013 I received a letter from a collection agency that states that I owe $200,000 on the 2nd mortgage and $32,000 on the visa. What are my rights? What am I obligated to pay? Does Arizona have a law that creditors are not allowed to solicit more than what they paid for a debt? Your help would be greatly appreciated. SB
  • I was in the hospital and didn't have my insurance information. I called the number given to me by the hospital when I was discharged. The hospital billed my insurance but didn't pass on my insurance to their physicians that saw me or x ray dept. I didn't know this until I was sent to collections over a year later. The insurance denied it due to timely filing laws. Can someone help me to settle/negotiate this debt? The collection agency is not working with me.
  • Hello! Back in 2000 my vehicle was repossed, this loan showed up on my credit report until 2006.I have checked my credit report every year after that and this account is no longer showing up. Just recently I recieved a phone call from a collection agency regarding this account. Are they allowed to do this? Do they have the right to after 3 years of this account falling off my credit report to start reporting it again? Thank You
  • I'm being sued by Chase bank, for a credit card I had years ago, I received a summon's and was asked to prepare a answer.My question is, I'm classified as SMI (serious mentally Ill)I'm Bi polar, have extreme anxiety issues and depression. I can't a ford a lawyer and there is no way I can repersent my self, what are my options here?
  • I have had credit card debt for years that I have not paid on how long can they harassess me by state lasw
  • Does AZ law require the debt of a deceased relative to be paid. I am listed as a trustee on my Mothers revocable trust. Am I required to pay on any of Her debt?
  • i owe a company for buying some musical equipment, i became ill and had to quit work. I tried to return the stuff, but the company just wants money...they say i will be going to jail? is this true? do i have any options
  • My husband has a child support collection that was filed against him prior to our marriage, the child support collection is with his exwife and children that are not mine. I am obligated to pay the collection since the collection was prior to our marriage and it is for child support to his exwife and his children ?
  • I acquired a credit card in 2001 and never made a payment on the debt. A judgment was filed in Ohio. I moved to AZ and the collector filed a foreign judgment Jan 31, 2008 and filed an Affidavit for Renewal February 26, 2013. from what I have read, the statute of limitations is 5 years, since they recorded the renewal 1 month after the expiration, is this debt enforceable?

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