Expert: Mark J. Markus- California Bankruptcy Attorney - 9/13/2009

Question
I filed Chapter 7 Bankruptcy due to disability. Somehow, the 1st mortgage wasn't reaffirmed. The 2nd mortgage was. The bankruptcy was discharged in April 2008.

With disability back pay, I paid nearly all of the 2nd mortgage. But, I'm still upside down in my mortgage and requested a loan modification. I'm current on both mortgages.

If I'm offered a modification, will my loan remain "not affirmed" or will it be considered "reaffirmed" or perhaps a new loan?

Currently the credit bureaus have my 1st mortgage listed as "paid/closed" with no balance. And no payments have been reported since January 2008.

If they offer me a modification and the loan isn't reaffirmed, will the payments continue to go unreported?

I understand that under modifications they can report payments as being "partial payments". If the modification is considered a new loan, can they report payments as "partial payments".

No one seems to have the answers to these questions.

Thank you.

Answer
"Reaffirmation Agreement" is a term of art used in bankruptcy and has no real meaning outside of it.  You can only reaffirm a debt prior to receiving your discharge, so there is no more reaffirmation at this point.

If you enter into a loan modification, it is essentially a new loan--most likely a recourse loan--and if you fail to pay it, not only can the lender foreclose, but you could be liable for a deficiency judgment.

http://www.bklaw.com/