Expert: Terry Leeders - 2/25/2008

Question
In 2004 my husband and I filed for chapter 7 bankruptcy.  We decided to reaffirm our home loan and a car loan.  The car loan was reaffirmed without any problems and we have since paid the loan. In 2005, before our bankruptcy had been closed we started to get behind on our mortage payments.  Looking back, we just should've filed for bankruptcy on the loan, but we did not.  While we were having problems we contacted the mortgage company and they told us that they had never received a reaffirmation statement from us.  I contacted my attorney, who had a copy of the signed reaffirmation statement and he sent it a second time.  We signed a loan modification aggreement with them in July of 2006.  I am not sure if this took place before or after the closing of our bankruptcy.  Since then we have never received any payments or contact from them until we fell behind on our payments again.  We have bought another house and have tried to sell the other one, but have been told it is not worth even close to what the original appraisal and loan was for.  The mortgage company says they cannot call me or send bills because the reaffirmation statement was not received and in order to reaffirm the loan we need to reopen the case.  We have someone who is interested in buying the house for a reduced price through a short sale, but in the meantime we received a foreclose notice.  During this process my attorney also checked with the bankruptcy court to see if the reaffirmation statement had been included in the bankruptcy and it was not, he also found out that $1000 of our taxes that we paid the court went to our mortgage company during the closing of our bankruptcy.  At this point we do not care about losing the house we just want out from underneith it.  My question is can they come after us for any outstanding amount owed on it since the bankruptcy didn't include a reaffirmation statement for them.

Answer
If the creditor does not have a valid reaffirmation and if one wasn't filed with the court, you would not be responsible for any deficiency balance on the property if you let the foreclosure proceed.  Even if your intention was to keep it, without the reaffirmation, the creditor cannot collect on the debt.  Now, they still have a valid lien on the home, and can recoup thru foreclosure, but thats it.