Back in 2008, I had filed for bankruptcy Chapter 7. I wanted to keep my home so the mortgage was not discharged and the debt never reaffirmed. Due to personal circumstances, my payments have not been exactly on time and I've missed a few but for the most part, I have made most of the payments until 6 months ago, I was in the process of sending half of the money within the next few days when I received a letter from the attorney representing the lending co (Seterus) threatening foreclosure of the home within the next 30 days. I would like to point out that since the bankruptcy or even before I've always had a hard time contacting Seterus. They dont seem to document any phone calls and sometimes I wonder if they really know what they are doing. We've tried to work out a "modification" a couple of times before and both times it went nowhere, not really sure why. I am constantly receiving "welcome to Seterus" packages from them after so many years of doing business with them and random "thank you for applying to our modification program(...)" letters when I had already given up trying to do this. Come think of it, in addition to the personal circumstances I mentioned before, another big (and stupid) reason for not making/missing payments is because Seterus stopped all contact with me since being notified of my bankruptcy filing (even though I didnt include the property) and as a consequence, the timely payments I should've been making every month didnt feel as "urgent" as before when I used to receive the monthly statements. The bottom line is this: I want to keep my home while hoping they can modify the monthly payments. Obviously, that would be the ideal scenario and most advantageous for all the parties involved. Should I apply for another modification? I wasn't sure if this is still a possibility since they turned my case over to a law office. Should I reaffirm the debt at this point? Should I still make the payment I was planning on sending this week? I can and would continue to make monthly payments if they perhaps agreed to add the months that I currently owe back to the loan balance because there is no way I would be able to pay that amount all at once. Please guide me in the right direction, I realize that I would eventually have to get a lawyer for this situation but right now, I just want to know specifically what im running against. Thank you for any suggestions you may have and I hope to hear from you soon!
2 Answers from Attorneys
The "I didn't include the property" in bankruptcy doesn't sound correct. There is no such thing as an a la carte bankruptcy, it is the person who seeks bankruptcy relief, not specific debts. We can take debts out of the bankruptcy discharge through reaffirmation, but this is a process that must be completed before the bankruptcy case is finalized, and often requires a hearing and court approval. So, I'm willing to bet that the property and the mortgage were both included in the bankruptcy case, as they are required to be, because one must list all their assets and debt. This makes sense, especially where you say that Seterus stopped sending statements once the bankruptcy began. It also makes sense because you say that you did not reaffirm.
At this point, you may no longer reaffirm, because reaffirmation must be done while the bankruptcy case is still open. You can always apply for a modification - and unless there's a new promise to repay, you would still be under the protections of the discharge. You can also try to refinance with a different bank (provided you have sufficient equity and income), but then there will definitely be a new promissory note and personal liability if you were to default again.
Based on the timeline, it also sounds like you are possibly eligible to file for Chapter 13 bankruptcy, but that's a decision that you should make with an attorney, and it would depend on what other debts you may have out there as well as other factors.
I agree with everything Attorney Lev wrote.
I'll add to HOLD ON TO YOUR MONEY FOR NOW. You might need it for a new chapter 13 if a new modification is not successful.
Yes, I said a new modification. So I'm adding that as well to Attorney Lev's response. New developments in federal regulations are encouraging me to suggest that a modification might be more viable now than before.
That does not mean a modification is better than a new chapter 13 filing. Modifications have a cost - like the huge amount of interest that might be added to the end of the mortgage's duration. Chapter 13 does not have that. An examination of your income and expenses is needed to know if you can afford a successful chapter 13 filing.
You should also know - and I hate saying this - that lawyers seem to have better modification successes than unrepresented borrowers.
So do nothing until you sit down with a lawyer who specializes in both chapter 13 bankruptcies and modifications.
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