Expert: Mark J. Markus- California Bankruptcy Attorney - 3/23/2011

Question
We filed bankruptcy in Nov 2010. We talked with our mortgage company (PNC) and they offered a Modification. They sent the paperwork in Jan 2011 to our attorney (including the due date of the new payment, March 1) and we went down and signed it on Jan 19, 2011, had it notarized, and mailed it back. PNC had also said we needed a letter from the trustee in the case for "approval" of the deal since it had not been discharged at that point.
Our attorney argued with my wife and I AND the mortgage company that since it was a chapter 7, that a letter from the trustee was not needed. After much discussion, the attorney finally agreed to ask the trustee for the letter. Several emails were sent to the trustee asking for the letter between Jan 20 until Feb 4 (proof was provided by the attorney) without luck of getting the letter. On the paperwork from PNC, it was stated "all documents need to be submitted by Feb 5". Our bankruptcy was discharged on Feb 8, 2011, we never heard anymore from the lawyer or the mortgage company. So on March 1 I tried to make the payment but the online payment thing would not let me, so I called the 800 number, the gentleman who had been helping us through the modification told us that all the paperwork had not been submitted, so the mod was null and void. He stated that if we could get the letter from the trustee he would try and get it pushed through with the supervisor. We called the lawyer and she stated that our case was discharged now and that she was no longer representing us, and that we would have to contact the trustee ourselves, she stated that she didn't pursue the letter after the Feb 4 email because the bankruptcy was discharged and it was a mute point, she also stated that the Modification and the mortgage was not part of her job anyway, just the bankruptcy.
I called the trustee's office, they were a little upset that I had called myself and stated that I needed to go through my attorney, I told them that I was doing what the attorney advised. About an hour later they called and faxed me the letter I needed and apologized and said that it was just overlooked. I faxed the letter to PNC and they stated they would let us know. After 2 weeks PNC finally called and stated that the modification was not going to be honored since it had been over a month late. They said the only thing we could do is re-do the paperwork for a modification but the only way that would be offered was if we petitioned the court and had our case reopened and reaffirmed the mortgage. We received a letter yesterday from PNC stating "Intent to Foreclose". I emailed our rep from PNC and asked if that was normal but he replied simply "I cannot do anything else for you until you reaffirm the mortgage".
I have called the attorney but she will not return our calls. We don't know what to do from here! We don't want to lose our house, but I don't want to reaffirm the house with "the chance" that they will do a modification. I'm sure at this point they can still not do the modification. Is there any avenues to pursue against our lawyer or the trustee for not following through with the letter we needed that would have made all this not have happened in the first place? I feel since all this was started before the discharge, and that all financial dealings had to go through our attorney at that point, she should have taken care of this better. Do we just accept the loss of the house and move on? Any suggestions?

Answer
This is not the fault of either your attorney or the Trustee in your case.  This is blatant, philistine, pig-ignorance on the part of your mortgage company.  That doesn't help you any, but it's the truth.  There is nothing requiring a reaffirmation agreement or requiring the Trustee to sign off on a loan modification for the property (to be hypertechnical, the Trustee owned your property until it was abandoned which occurred, at the latest, when your bankruptcy case was closed, but the Trustee is not required to abandon the property or accommodate you in any way).

What this comes down to is the mortgage company simply not wanting to do the modification and/or having no comprehension of how bankruptcy works.   You can't reopen your case and do a reaffirmation agreement; no court would allow that (at least none I've heard of).   

Perhaps most importantly, there's NOTHING preventing the mortgage lender from doing a new modification agreement now.  A new agreement would have the same legal effect as a reaffirmed prior loan.  Your best option is to keep trying with your mortgage company and try to speak with someone who actually wants to assist and understands what the bankruptcy filing actually means.

Mark J. Markus, Attorney at Law
Handling exclusively bankruptcy law cases in California since 1991.
http://www.bklaw.com/