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The Reaffirmation of a Mortgage: Yay or Nay?

Reaffirmation of a Mortgage

The Reaffirmation of a Mortgage: Yay or Nay?

Are you considering filing for bankruptcy and opting for the reaffirmation of a mortgage? If so, that means recommitting to a debt which otherwise would have been discharged as part of the bankruptcy. Debtors typically opt to reaffirm a mortgage because they believe they can afford the repayments. However, given you are entering into bankruptcy to get out of debt, choosing to reaffirm a mortgage comes with risks.

Reaffirmation of a Mortgage

When you enter into the reaffirmation of a mortgage, it involves a legal contract where you promise to repay all or a portion of the debt. This commitment includes adhering to the terms of the loan without defaulting. If you do end up defaulting, you may lose your home through foreclosure and remain liable for the debt, subject to state law. The question is: are you confident you can keep up with the payments, based on your personal circumstances and any other financial obligations? Even if you do not reaffirm, the lender retains a lien on your home and may foreclose if a default in payments occurs, but without a reaffirmation agreement, you are not liable for the debt after a bankruptcy discharge.

Reasons People Reaffirm a Mortgage

People who are up-to-date with loan payments and foresee a level of financial stability which would allow them to continue with payments may choose reaffirmation of a mortgage as an option. When you reaffirm a mortgage during the bankruptcy procedure, you are telling the lender that payments will continue in line with the terms of the loan.

One of the benefits of reaffirmation of a mortgage is how it impacts on credit reporting. When you agree to commit to the terms of the loan, credit bureaus are alerted to the fact you are proceeding with a bankruptcy and are continuing to make regular mortgage payments on the property. Some lenders may also require reaffirmation of a mortgage for crediting reporting purposes.

Making the Right Choice

The bottom line is you are responsible for keeping payments current when you choose reaffirmation of a mortgage. Each debtor’s situation is different, so whether or not to reaffirm a mortgage will depend on your payment history and if you are able to make future payments consistently. In doing so, you may ensure the lender reports payments to credit reporting bureaus.

Once you commit to reaffirmation of a mortgage, you are locked into a legal contract, which makes you responsible for repayment of the debt. This is a commitment which is best suited to individuals who know they can continue to make payments on time each month. A reaffirmation agreement typically is filed in a Chapter 7 bankruptcy. If you are already delinquent on payments, you may wish to file a Chapter 13 bankruptcy instead, which may help you keep your home and catch up on house payments.

Bankruptcy Lawyer

It is important to work with your bankruptcy lawyer or debt advisor to consider your financial goals, and whether the reaffirmation of a mortgage is a viable option for you. H. Lehman Franklin, P.C. can help you determine the suitability of reaffirming a mortgage based on your specific circumstances. Call H. Lehman Franklin, P.C. at 912-764-9616 or email us at info@hlfranklin.com today for bankruptcy consultation and representation in Georgia.