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Personal liability on mortgage?

8bitmachinegun
Regular Contributor

Personal liability on mortgage?

I filed for Chapter 7 almost 10 years ago, so it's about to drop off my credit. When I declared bankruptcy, I was allowed to keep the house because I had less than $5K in equity in the place. A year or two later, I was having trouble making the mortgage payments, so I got an adjustment (don't know if that's the right legal term, but it definitely was not a refinance) to the mortgage to a more reasonable amount. I've been paying ever since, although I got really close to foreclosure 4 or 5 years ago.

 

Recently I just noticed this boilerplate on my mortgage statement:

 

Our records show that either you are a debtor in bankruptcy or you discharged personal liability for your mortgage loan in bankruptcy.

We are sending this statement to you for informational and compliance purposes only. It is not an attempt to collect a debt against you.

 

Since I'm not actually in bankruptcy any more, what does the bit about personal liability mean?

FICO8 - Aug 2020
FICO9 - Aug 2019
Message 1 of 12
11 REPLIES 11
Throckmorton
Regular Contributor

Re: Personal liability on mortgage?

The statement suggests that you did not reaffirm your mortgage in bankruptcy. If you stop paying your mortgage, the bank can still take your house, since they have a lien on it. They cannot sure you for any amount that they don't recover after they sell the house, since you have no legal liability to pay them.

Message 2 of 12
8bitmachinegun
Regular Contributor

Re: Personal liability on mortgage?

Thanks for the info. Some of the details are coming back to me. It was called a 'modification' and it was converted to a 40 year mortgage at 3% for the first 10 years, then adjustable up to 5.5%. Does a modification effectively reaffirm a mortgage?

 

That might also explain the complete absence of my mortgage on all three of the bureau's reports.

FICO8 - Aug 2020
FICO9 - Aug 2019
Message 3 of 12
FireMedic1
Super Contributor

Re: Personal liability on mortgage?


@Throckmorton wrote:

The statement suggests that you did not reaffirm your mortgage in bankruptcy. If you stop paying your mortgage, the bank can still take your house, since they have a lien on it. They cannot sure you for any amount that they don't recover after they sell the house, since you have no legal liability to pay them.


A house or a car work the same way. No reaffimation. They can repo or forclose. Its like they never filed BK. You can be sued for any balance that doesnt cover the amount owed after auction. Now if it was reaffirmed. Then you are not liable for any monies and walk away. So @8bitmachinegun did you reaffirm or not.





My posts are JMHO. My siggy is not to brag at all. Just sharing my experiences after learning here from rebuild to recovery after BK DC 540's. And to show fellow members what can be accomplished when you do it right and play the FICO Credit Game.
Message 4 of 12
Throckmorton
Regular Contributor

Re: Personal liability on mortgage?


@FireMedic1 wrote: A house or a car work the same way. No reaffimation. They can repo or forclose. Its like they never filed BK. You can be sued for any balance that doesnt cover the amount owed after auction. Now if it was reaffirmed. Then you are not liable for any monies and walk away. So @8bitmachinegundid you reaffirm or not.

Isn't it the exact opposite of this? You reaffirm and they can sue for balance owed. You don't reaffirm and they can't.

Message 5 of 12
FireMedic1
Super Contributor

Re: Personal liability on mortgage?

If you reaffirm and dont make payemts. They can take it away. And you'll owe the balance. If you dont reaffirm its still taken away but you can walk away.When you reaffirm a debt, you agree to be responsible for the debt as if you had not filed bankruptcy.

If you reaffirm after DC it will report to the CRA's. If you dont. Nothing is reported.

 





My posts are JMHO. My siggy is not to brag at all. Just sharing my experiences after learning here from rebuild to recovery after BK DC 540's. And to show fellow members what can be accomplished when you do it right and play the FICO Credit Game.
Message 6 of 12
8bitmachinegun
Regular Contributor

Re: Personal liability on mortgage?

@FireMedic1As far as I can remember, I never reaffirmed the mortgage. My lawyer told me the modification was a great deal, I agreed  with him, and took the deal. But honestly, it's possible one of the billions of pieces of paper I signed was a reaffirmation. Is there anyway I can be sure? My lawyer had a stroke and retired a couple of years later, so I can't ask him. I've tried talking to the lawyer who took over his practice, but he won't return my emails.

FICO8 - Aug 2020
FICO9 - Aug 2019
Message 7 of 12
despritfreya
Frequent Contributor

Re: Personal liability on mortgage?


@8bitmachinegun wrote:

As far as I can remember, I never reaffirmed the mortgage. . . But honestly, it's possible one of the billions of pieces of paper I signed was a reaffirmation. Is there anyway I can be sure?


It is highly unlikely that your reaffirmed the mortgage.  You can access your court docket by setting up a PACER account at www.pacer.gov

 

Once you access your docket, look to see if a reaffirmation agreement was filed.  I doubt it was.

 

Des.

 

Message 8 of 12
8bitmachinegun
Regular Contributor

Re: Personal liability on mortgage?

@despritfreya Thanks for the awesome tip about PACER. I have two bankruptcy dockets, a Chapter 7 and Chapter 13. My lawyer used a legal trick known informally as a "Chapter 20". He filed a Chapter 7 to negate my CC and other unsecured debt whilst keeping my car and house, then filed a Chapter 13 to set up more reasonable terms for the car note and mortgage, and a repayment plan for past due payments.

I've checked through both dockets, and only saw one reaffirmation notice - for the car. It was very clearly marked, and I saw no other documents denoted as reaffirmations. Is that a clear indicator that I did not reaffirm the mortgage?

 

What are the implications of not reaffirming the mortgage? I'm surprised the bank didn't demand such when I got the modification.

FICO8 - Aug 2020
FICO9 - Aug 2019
Message 9 of 12
despritfreya
Frequent Contributor

Re: Personal liability on mortgage?


@8bitmachinegun wrote:

I have two bankruptcy dockets, a Chapter 7 and Chapter 13. My lawyer. . . filed a Chapter 7 to negate my CC and other unsecured debt whilst keeping my car and house, then filed a Chapter 13 to set up more reasonable terms for the car note and mortgage, and a repayment plan for past due payments.  I've checked through both dockets, and only saw one reaffirmation notice - for the car. It was very clearly marked, and I saw no other documents denoted as reaffirmations. Is that a clear indicator that I did not reaffirm the mortgage?  What are the implications of not reaffirming the mortgage. . .


Since you did not reaffirm in the Chapter 7, the underlying promissory note (loan) was discharged in the 7 but the mortgage lien survived.  You filed the Chapter 13 to cure any pre-filing default and, therefore, stopped the lender from exercising its lien rights.   Subsequently you were able to modify your mortgage under HAMP which does not require a reaffirmation agreement (not that the lender could have required it once you got the 7 discharge).  As others have pointed out, should you default and lose the home to a foreclosure, you cannot be sued for the balance owed under the promissory note.

 

Des.

Message 10 of 12
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