Ohio bankruptcy protection is used to help consumer dig out of debt by eliminating unsecured debt. Your home is protected by the Ohio bankruptcy exemptions, and you may choose to reaffirm your commitment to making timely payments to the lender in order to keep your home. Dayton bankruptcy attorneys often get asked if reaffirming mortgage debt after bankruptcy is a smart idea. The reality is, reaffirmation of your mortgage may or may not be the right play, but there are some basic things that individuals should understand about the process.
How Reaffirming a Mortgage Works
The key to understanding reaffirmation lies in discerning between the legal obligation to pay a mortgage debt and contractual lien on your home. Receiving your Chapter 7 bankruptcy discharge eliminates your legal obligation to pay a debt. However, the mortgage company still has an agreement that says they technically own the deed to your home and can take it back if you refuse to pay. Thus, when you reaffirm a debt, you agree that you still owe a debt even after your bankruptcy case is over.
Should I reaffirm my mortgage in bankruptcy?
The primary reason that consumers reaffirm mortgage debt is that reaffirmation provides an ironclad way of keeping your property after bankruptcy. Depending on who your mortgage lender is, you may receive pressure to reaffirm your mortgage during Chapter 7 bankruptcy. In fact, some mortgage companies may state that you must reaffirm your mortgage before you can refinance in Chapter 7 bankruptcy. Reaffirming your mortgage debt is essentially creating a new loan. Therefore, it provides you with the opportunity to negotiate new terms that could be more favorable than your current interest rate or payment amount.
When to Avoid Reaffirming a Debt
Reaffirming a debt, in some cases, can be a horrible idea, which is why you always want to consult an Ohio bankruptcy attorney before doing so. Reaffirmation of your mortgage ensures that your secured debt will survive the bankruptcy, which is directly opposite the purpose of Chapter 7 bankruptcy.
Additionally, one major stumbling block that can occur involves reaffirming more than one mortgage. If you reaffirm the second line of home equity and lose to the home through foreclosure, you will still be responsible for the second loan, and this could cause significant financial troubles to say the least.
Contact a Dayton Bankruptcy Attorney
A serious advantage to having a Dayton bankruptcy attorney represent you is their ability to sign off on your reaffirmation agreement to demonstrate to the bankruptcy court that you will not be placed in financial hardship by the new agreement. Many bankruptcy judges will not approve a reaffirmation of a mortgage without this statement from your bankruptcy attorney.
Moreover, deciding to reaffirm your mortgage debt after bankruptcy is one that carries long-standing personal and financial implications. As much, you should seek the counsel of a Dayton bankruptcy attorney before signing a reaffirmation agreement with your mortgage lender.