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To affirm or not affirm, that is the question

When someone files bankruptcy, they're required to list all their debts and assets. Debtors who want to keep their home, have a choice: They can reaffirm the debt by signing a Reaffirmation Agreement or they can continue to make monthly payments. In most cases, it is advantageous for a debtor not to reaffirm a mortgage debt and instead, continue to make the mortgage payments, especially if the home is under water and there is no equity in the property.

Why? If they reaffirm the debt and then find themselves in a situation where they have to give up the house, they would still have the mortgage debt. They did not discharge that debt in the bankruptcy. So what kind of questions come up when a debtor does not formally reaffirm the debt in bankruptcy, but their intention is to keep the property and continue making payments:?

1. Was a reaffirmation of a mortgage required by the lender? This answer makes a difference in the timing of events if

the homeowner ends up having to give up the home.

2. Will mortgage statements be sent to the homeowner without a reaffirmation agreement? Often no, so the homeowner will have to be sure they don't miss a payment and that they send the payment to the correct address- it may change from where they sent it before the bankruptcy and electronic payments may not be an option.

3. Will a loan modification be available without a reaffirmation agreement?

4. Will the same lender refinance without a reaffirmation agreement?

5. Will the mortgage payments be reported to credit bureaus and therefore improve the debtor's credit score?


National Association of Consumer Bankruptcy Attorneys (NACBA) and the Consumer Finance Protection Bureau (CFPB) have made efforts to implement new mortgage servicing rules addressing these issues. But for now, it may be best to consult with an attorney who is familiar with these problems Please contact Attorney Arna D. Cortazzo today for more informaion. (321) 690-2363

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