September 27, 2020

Should You Reaffirm Your Mortgage Loan in Chapter 7?

mortgage reaffirmation in Chapter 7When it works as planned, Chapter 7 serves to discharge (wipes out) your unsecured debt, while allowing you to keep most or all of your property.   If you have secured debt in your Chapter 7, you generally have the options of:

  • surrendering your property and walking away from any associated debt
  • redeeming your property by paying the secured creditor the fair market value in one lump sum
  • reaffirming your property by re-entering into a contract to pay the installment note
  • continuing to pay the note but not signing a reaffirmation

There are pros and cons for each of these options.   In this blog post I want to discuss the good and bad of reaffirming your mortgage debt.

Many lawyers feel very strongly that you should never reaffirm your mortgage.   When you reaffirm, you are obligating yourself personally to pay your mortgage note.   This means that if you should default on this obligation and the value of your home is less than the outstanding balance (a very real possibility in current economic times) you could find yourself facing a deficiency claim in the tens of thousands of dollars. [Read more…]