310.376.9865
After one files for bankruptcy they still have some decisions to make. A home owner has to decide whether or not to sign a reaffirmation agreement. (Reaffirm- a new promise to pay a creditor after bankruptcy, making the debtor again liable for the debt that was just eliminated by the bankruptcy).
Frequently, the lender will indicate unless the debtor signs a reaffirmation agreement, they will no longer send monthly statements, nor will the report the payments to credit reporting bureaus.
The majority of Chapter 7 Bankruptcy Lawyers will NOT recommend their clients sign a reaffirmation agreement for the following reasons:
- Reaffirmation of REAL PROPERTY is not required by the bankruptcy code;
- If the lender does not report the payment to the credit bureau, the debtor can dispute this fact once a month to challenge the fact that he did make a payment. (Yes, it is a pain, but superior to reaffirmation).
- If the lender isn’t going to report a good payment history, will he report a bad payment history? So, if your payments are late, would the lender report this fact?
- If you do not reaffirm your home loan, it may improve your credit score. One of the factors considered when determining your credit score is your income to debt ratio. If this debt is discharged in your Chapter 7 bankruptcy, (even though you still have to make your house payments to avoid foreclosure) and no longer shows that you are liable for the debt, it will lower the amount of debt owed in relation to your income.
The reason you shouldn’t enter into a reaffirmation agreement was brought home last week when a former client called. We did his Chapter 7 bankruptcy about three years ago.
He was now trying to go forward with a short sale. The second mortgage holder wouldn’t approve unless they receive $3,000.00. They were also threatening to sue him for the amount owed on the second mortgage unless he paid them $3,000.00.
I reminded by client, that I had refused to approve his reaffirmation for his second mortgage and told him he better not sign the reaffirmation. Since he took my advice, the second mortgage cannot collect a dime from him. So while the second mortgage may not approve the short sale, they won’t be able to collect a dime from my client.
DISCLAIMER: The content of this website is intended for informational purposes only. Nothing herein is intended to form the basis of an attorney-client relationship or constitute legal advice.
Los Angeles/Orange County Chapter 7 Bankruptcy Attorney
- Law Offices MJ Mann Bankruptcy Attorney
- 2706 Artesia Blvd, Suite BK
- Redondo Beach, CA 90278
- 310.376.9865
