Legal Question in Bankruptcy in California

Reaffirmation Agreements on mortgages are a real question mark in my mind. In the past, mortgage lenders have always let you do what is referred to as a "ride-through." In other words, if you kept your mortgage current after filing the case, you would simply continue making payments, and eventually refinance out of that loan, or pay it off, in which case you would be done with the mortgage lender. The problem with reaffirmation is that you now have agreed to reaffirm the whole obligation (where without one, your personal liability for the loan is discharged in the bankruptcy), and if you walk away from the property in the future, you may be personally liable for any deficiency that may exist. The flip-side is that a new case (dealing with car loans) has given the mortgage lenders a stronger position to require reaffirmation or surrender of the house. I personally would not have reaffirmed the debt, given your question number 2 - $110,000 of negative equity - but that's a personal decision, not a legal one. As stated above, I don't generally recommend to clients that they retain a house that is completely upside down, as you have to understand that it could take many years to break even on that house, and if it is stretching you to pay the mortgage, there is no sense in keeping it.

The judge will not, and cannot modify your mortgage if it is secured by your primary residence. Also, it sounds as if you filed a chapter 7, in which case there is no means of changing the terms of the mortgage unless the lender volunteers to do so, and they won't.

A reaffirmation agreement does not stop you from paying off the mortgage, either through direct payment or through a refinance. Your credit will be the issue holding you back on a refinance, but post-bankruptcy, you can start rebuilding your credit immediately. Good luck - I would suggest that you really think about that house, and whether you want to be saddled with a mortgage that so greatly exceeds the value of the home.

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