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If I Did Not Reaffirm My Mortgage in My Chapter 7, How Does That Affect My Loan Modification Now?

Reaffirmation agreements generally benefit the mortgage company, not you. When you sign a reaffirmation agreement, this effectively waives the discharge you would have received in your Chapter 7. A reaffirmation agreement is a legally binding contract that re-obligates you on the mortgage loan. So, if your mortgage company were to foreclose in the future, you would be responsible for the balance of the loan.

Reaffirmation agreements generally benefit the mortgage company, not you. When you sign a reaffirmation agreement, this effectively waives the discharge you would have received in your Chapter 7. A reaffirmation agreement is a legally binding contract that re-obligates you on the mortgage loan. So, if your mortgage company were to foreclose in the future, you would be responsible for the balance of the loan.

Still, many times we will advise clients to sign a reaffirmation agreement on a mortgage. This is for a number of reasons:

  1. Once your other debt is discharged in your Chapter 7, you will have enough money in your budget to comfortably make your mortgage payment each month.
  2. You would like for your mortgage company to continue to send monthly statements and report your payments to the credit reporting agencies.
  3. You expect that you might want to apply for a loan modification in the future, and you want your mortgage company to approve your application.

Recently, some Chapter 7 clients have called and asked to reopen their case, even if they received a discharge years ago, in order to file a reaffirmation agreement with their mortgage company. This is because mortgage companies increasingly are unwilling to grant a loan modification application when the original mortgage was not reaffirmed.

If you received a discharge in a Chapter 7 bankruptcy and your mortgage company is willing to grant a loan modification even though you did not sign a reaffirmation agreement, the loan modification will not re-obligate you on the mortgage. A loan modification is not a new legal obligation even though it changes the terms of the loan. If you were to refinance, however, this would be a completely new contract and you would be legally obligated to pay the debt.

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