Debt Collection, Garnishment, Repossession Article


Mortgage Reaffirmation Requirements Bogus

When a homeowner files for bankruptcy there is most likely a lender on the home involved. Once the discharge of the debts is entered by the Bankruptcy Court then borrower is no longer personally liable for the debt. But, if the borrower wants to keep their home they will need to pay the regular monthly payment because there is a lien or security interest in the real property. Some lenders will ask the borrower to sign a reaffirmation agreement after the bankruptcy is filed. This reaffirmation agreement will give the lender the right to sue the borrower if there is a later default.

Some states have laws that protect their homeowners called no-recourse or anti-deficiency statutes. For instance in Arizona a house homeowner cannot be sued after a trustee’s sale is completed so long as the property fits into a certain description: 2 1/2 acres or less, utilized and occupied as a one or two family residence. Therefore, even if an Arizona homeowner signs a reaffirmation agreement they will be not be liable on a first position deed of trust (probably not true for a junior deed of trust). Having said that the judges in Arizona will not sign reaffirmation agreements on residential property. They take this position in order to protect the naive homeowner who is being bullied by the lender into signing a reaffirmation agreement.

Reaffirmation agreement becomes effective upon filing with the Court if represented by an attorney and not presumed an undue hardship. Per the reaffirmation agreement language set out in the Code, “…No court approval is required if your reaffirmation agreement is for a consumer debt secured by a mortgage, deed of trust, security deed, or other lien on your real property, like your home.” § 524(k)(3)(J)(i)7.

Many lenders will state that they cannot refinance a mortgage loan because the loan was not reaffirmed in the bankruptcy. But, any lender has the right to refinance any loan, assuming no federal or state prohibitions. Instead the lender blames the borrower’s attorney. Stating that the attorney did something wrong. In Arizona this is a bold faced lie.

Many programs will refinance once a bankruptcy is completed. For instance -Borrowers who have received a Chapter 7 bankruptcy discharge in a case involving the first lien mortgage who did not reaffirm the mortgage debt under applicable law are eligible for certain programs, depending on the type of loan. According to one expert “The following language must be inserted in Section 1 of the Home Affordable Modification Agreement: “I was discharged in a Chapter 7 bankruptcy proceeding subsequent to the execution of the loan documents. Based on this representation, Lender agrees that I will not have personal liability on the debt pursuant to this Agreement.” ” Accord, In re Bellano, 456 B.R. 220, 224 (Bankr. E.D. Pa. 2011); In re Owens, 10-72509, 2013 WL 4052874 (Bankr. W.D. Va. Aug. 9, 2013) (“…the lack of a reaffirmation agreement with the Bank and the issuance of the discharge to the Debtor do not appear to preclude the latter even now from filing an application under the HAMP program.”); In re Pope, 10-19688-RGM, 2011 WL 671972 (Bankr. E.D. Va. Feb. 17, 2011) (Finding that a lender’s requirement of reaffirmation as a condition precedent to consideration of a loan modification was improper).

My point – your lender is not your friend when it comes to reaffirmation agreements. Talk to your attorney, get good legal advice in order to determine the law and your rights. Talk to the folks at www.makinghomeaffordable.gov. Talk to other lenders. This is an area of law that is changing every day. Do not fall into the trap of assuming a “no” today will still be a “no” tomorrow.

Contributing Attorney: Diane L. Drain is an Arizona bankruptcy attorney at the Law Office of D L Drain.  



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QUESTIONS

  • My trial was scheduled more than 10 months after the Plaintiff filed a lawsut. It has been over 2 months since my trial and there has been no ruling. Can I file a post trial motion to dismiss based on the 10 month rule in Az? This is a civil debt matter and I filed everything in a timely fashion. At trial the judge halted the trial half way thru as he said he was unfamiliar with the new amended AZ laws. It has been over 365 days since they file a complaint and over 2 months since we both gave him our memorandum of case law after trial. Question is should I wait for a decision or file a motion?
  • We had a vehicle repossessed recently and there is an outstanding balance. What are the laws on garnishment? If we try to work with them and they won't accept what we can afford; do they have to accept any payment that we can afford to send them or do they have the right to garnish our paychecks? Thank you!
  • I have a credit card with the same bank where I have a Certificate of Deposit. My credit card payments are in default. I was using a credit counseling company to help me get out of debt and help me arrange a payment plan on the overdue credit card debt. The bank used my Certificate of Deposit to pay off the credit card debt without my permission. Is this legal?
  • I have an employee that has co-signed for a loan with her son, the son has defaulted and is filing bankruptcy, the lender has not yet contacted her for repayment of the loan. She would like to be ready to do whatever she has to do to make this go away. She doesn't want to file for bankruptcy, but may have to. She is looking for a low cost/free help. Any help would be greatly appreciated.
  • MI nombre es eleuterio paredes y mi pregunta es en el año 05 arizona federal me presto $9000 para comprar un auto pero no lo pude pagar y despues el abogado que los representa me cobrava la deuda y durante un año le estuve pagando pero perdí el trabajo y ahora de nuevo me están cobrando pero me están asiendo un garnishment de mi cheque estoy considerando la bancarrota pero no se si es una buena idea pues esa es a única cuenta que tengo y no se que tanto me afectaría una bancarrota
  • Hi, I was married for a year which ended in a annulment, but in the mean time my husband borrowed money from me, I need to know how can get it back, what kind of lawyer I look for, please help.
  • I'm a mobile tool vendor and has sold a tool to a individual who refuses to pay and will not return it, how can I collect from this person?
  • I have just found out that a judgement was found against me back in 2008. It is from a credit collection company. I never recieved a notice of this Judgement and I would not have know about this jugement as it has never appeared on my credit reports. This judgement lists both myslef and my husband. I never had a credit card with my husband in this state. I would have never knoiwn about this if I was not selling my poperty. He is not listed on the deed,so can the proceeds pay for the judgement. We where never notified of the judgement under the Rules of Civil procedure # 55.
  • If I have received a release of garnishment can they re file an application for garnishment?
  • I am a lien holder on a note for a auto. The note is in the wifes's name and the auto is in the husbands name, they quit paying and I want to repossess the auto. Do I have legal right to since the auto is not in her name?

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