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IF the mortgage was not specifically discharged during the bankruptcy, it is still a valid and collectible debt. It sounds like this is the case since she's continued payments on the note post discharge.
Thus, if she did stop making payments, the lender would have the right to foreclose on the property. If the foreclosure does not produce enough money to pay off the mortgage, the lender can also sue you for a deficinecy judgment (which are allowed in Colorado.
A deficiency judgment awards the lender the difference between what you owed on the loan and what the property sold for at the foreclosure.
A reaffirmation is only for the benefit of the lender. It provides no protection or right to the debtor. IF she continued paying on the debt, she re-affirmed it and the lender accepted it without the security of a court order of reaffirmation.
The botXXXXX XXXXXne is that if she didn't lose the property, and the lender has accepted her payments, she still owns it and is liable for the debt on it. Thus, the lender has the right to foreclose as it would in any regular circumstance.
Let me clarify one thing. Because the debt was discharged, her personal liability to pay the mortgage obligation is gone, BUT her property is still subject to a lien in favor of the mortgage lender.
Her discharge serves to eliminate her personal obligation under the promissory note. However, it discharge does not eliminate the bank's security interest (or lien) against the real estate.
Because if the discharge, she would not be subject to a deficiency judgment.
Let me clarify one thing - I mis-spoke about her personal liability. Because the debt was discharged, her personal liability to pay the mortgage obligation is gone, BUT her property is still subject to a lien in favor of the mortgage lender.
If she's been paying on the mortgage, the statute of limitations has not tolled. The lender likely has 3 years from the date of the last payment to foreclose.
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