Legal Question in Bankruptcy in Pennsylvania

If my bankruptcy was discharged and my residence was not part of the bankruptcy, even though it started out in the beginning. The bank shows my mortgage as being part of the bankruptcy and as a zero balance on my credit report. When I call the mortgage company they tell me I have to reaffirm the debt, even though the mortgage was never part of the bankruptcy. My payments are not being credited to me on my credit report because of this. I also had a representative from the mortgage co. tell me I could walk away from this debt because of reason? very confusing to me

Asked on 4/13/13, 11:46 am

1 Answer from Attorneys

Talk to your bankruptcy attorney but it is in your best interest NOT to reaffirm the mortgage debt. Your mortgage company is right - you could walk away from your mortgage tomorrow with no further obligation. The mortgage lender can foreclose on the house if you do not pay, but they cannot come after you for liability for the debt because the liability was discharged.

I am not a bankruptcy attorney per se but I handle debt settlement and I need to know about this as a possible option for my clients with debts.

It sounds like you filed a chapter 7 bankruptcy. Regardless of what chapter you filed under, all of your debts and assets become part of the bankruptcy. The discharge that you get wipes out all of your dischargeable debts unless you enter into an agreement to reaffirm the debt. Bankruptcy courts don't like reaffirmance agreements and its not in your best interest to do that because it basically negates the bankruptcy with respect to those debts. What it does is say to the creditor "this debt was discharged, but I am going to keep paying on the debt and the debt is revived." What this means to the creditor is that you cannot possibly file bankruptcy and get a discharge again for at least 8 years (depending on the kind of bankruptcy filed) and you have to keep paying on the debt because if you don't they can sue and get a judgment which they can collect on or, in the case of a mortgage, foreclose on your house and pursue you for a deficiency judgment.

If I were you, I would NOT reaffirm the debt. With a bankruptcy, your credit is toast anyway for about the first 2 years after your discharge. I would keep paying the mortgage and if you ever decide that you cannot afford the house payments, you give the keys back to the bank and simply walk away. After 2 years, your credit will start to heal. There are other things to boost your credit besides the mortgage.

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Answered on 4/13/13, 12:10 pm

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