There are many secured loans that you could decide to reaffirm after completing Chapter 7 bankruptcy, but your home mortgage may be the most consequential one. Discharging your mortgage does not remove the mortgage company's lien on your home. The mortgage company can foreclose on your home if you do not continue to make regular mortgage payments. While it is possible to continue making payments without reaffirming the mortgage, a reaffirmation agreement creates personal liability on the loan. It is important to note that reaffirming a mortgage is not the best option for every bankruptcy case. Because the Bankruptcy Code does not require a reaffirmation for real property (your home) unlike personal property (your car), there are several questions you should ask yourself before making that decision:
- Will I Be Able to Keep Up With the Payments?: Reaffirming your mortgage means you will again have personal liability for the loan. However, you may have some advantages that did not exist before your bankruptcy. Discharging debts after bankruptcy may allow you to put more of your income towards your mortgage. You should calculate your monthly budget before you reaffirm any debts.
- Was My Mortgage the Primary Reason I Filed for Bankruptcy?: The great thing about discharge is that it frees you from a debt obligation, even though in some instances that means you cannot keep the property. Reaffirming your mortgage may undo one of the primary benefits of bankruptcy. You should also consider the value of the property and the equity you have in it. You may be better off letting your mortgage company foreclose on your home if your mortgage is underwater--meaning that you owe more on the mortgage than the property is worth.
- What Are My Other Housing Options?: You obviously have to live somewhere else if you allow the mortgage company to foreclose on your home. Do you have another place in mind where you can move? Will it accommodate yourself and your family? How much will the new home cost? You need to answer all of these questions before surrendering your home.
- What Would Happen If I Defaulted on the Mortgage?: The mortgage company will most likely foreclose on your home if you start to miss payments again. If you have signed a reaffirmation agreement, the mortgage company can hold you liable if you owed more on the mortgage than what the mortgage company received by selling the property.
Contact a Frisco, Texas, Bankruptcy Lawyer
You can plan ahead during your bankruptcy for whether you want to reaffirm your mortgage. A Denton County bankruptcy attorney at The Page Law Firm can discuss the advantages and disadvantages of reaffirmation. Schedule a free consultation by calling 214-618-2101.