Expert: Mark J. Markus- California Bankruptcy Attorney - 8/6/2009

Question
I reside in CA and I am going through CH 7. I have a 2nd on my home. It is a HELOC. The company said that they would modify my loan agreement by decreasing my interest rate and turning it into a fixed rate instead of an ARM. When the paperwork was received it was a reaffirmation agreement and not a loan modification. Is there a difference between a reaffirmation and a loan modification when going through bankruptcy?

I was also told that they would no longer send me monthly statements and I would have to call in my payments every month. If I choose not to reaffirm, can the lender foreclose on the home. Currently my loan is upside down. I owe $287.00 on the first and $86,000 on the second. The home is appraised at $180,000.

Due to the BK the mortgage has closed my line of credit. Will they continue to report my payments to the credit bureaus if I choose not to sign the reaffirmation?  

Answer
Reaffirming the loan is essentially the same as a loan modification.   Are you sure they're saying they won't send you monthly statements after doing the reaffirmation agreement?   That's a bit ridiculous.

If you don't make your contractually due payments, yes they can foreclose, regardless of whether you reaffirm or not.  

If you don't reaffirm, they generally will not report the current monthly payments on your credit report, which is why I asked the question above.  The main reason of doing the reaffirmation agreement is to get that benefit.

http://www.bklaw.com/