Legal Question in Bankruptcy in Michigan

Are you sure the debt was never reaffirmed? You may have signed a Reaffirmation Agreement, even if it was not filed with the Court. Have you spoken to your bankruptcy lawyer about this? Once you filed bankruptcy, your agreement with your lender became void. However, if your lender continued to accept payments from you, then a new contract was established simply by their actions - you were offering X amount per month, and they accepted that. Your lender cannot foreclose simply because you did not reaffirm the debt - they would pursue foreclosure because you are 90 days behind. You should explore and consider your options, such as a loan modification application, depending on the amount of the loan, type of loan (there are more options for those with a federal loan, such as VA and FHA), value of the home, balance owed, and your financial & employment situation.

Lenders are required to consider your loan modification application and stop foreclosure proceedings for 90 days while reviewing your application. If you are eligible for a loan modification (there are several qualifying factors), then your lender must offer you options, such as reducing the principal of the loan, extending the loan to 40 years, and/or reducing the amount of your monthly payment. You should immediately obtain the necessary documentation from your lender. I would not suggest paying a company or a person any money to assist you with your loan modification, unless it is a lawyer. There are plenty of loan officers (mortgage companies) who are unemployed or slow with work, who are assisting people with loan modifications, with false promises and guarantees. They often charge several thousand dollars up front, when the paperwork takes an hour or less to fill out and submit.

Lenders are taking several months to review loan mod apps - sometimes as long as 6 months - so you should submit it as quickly as possible.

With regard to any deficiency should your lender foreclosure and sell the home, technically yes, a lender can seek to recover the difference from you. However, this is a rare occurrence in Michigan and there is a high standard/burden that a lender must meet in order to obtain a deficiency judgment from you (it is not like a standard collection case where you owe the money and have no defense). Most lenders do not pursue this unless there was fraud involved in obtaining the loan or there is a large amount of money involved. I would not worry about it. Should they actually file a lawsuit to obtain a deficiency judgment, I strongly recommend you retain legal counsel to protect your interests.

You should consult with a lawyer regarding a potential loan modification application and the legal issues identified in your question. If your prior attorney committed malpractice, and you are harmed by it, then you may have a viable malpractice claim against him. Should you wish to retain me, please contact me to set up a consultation and discuss the legal fees. Thank you.