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Roger, Attorney
Category: Bankruptcy Law
Satisfied Customers: 31766
Experience:  BV Rated by Martindale-Hubbell; SuperLawyer rating by Thompson-Reuters
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I have filed a Ch 7. My lawyer said that I should include my house mortgage in the bankrup

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I have filed a Ch 7. My lawyer said that I should include my house mortgage in the bankruptcy. When I told him that that would mean I would be homeless,
he said that even with my house being bankrupted I could stay in it as long as I made the payments. And then if I could not make the payments later I could walk away from the house without being liable for the difference owed in a foreclosure. Is this the law?
How will I know that the bank would not put me out of the house anyway. Or that they will not accept the payments, or that they will not sell it out from under me?
Submitted: 6 years ago.
Category: Bankruptcy Law
Expert:  Roger replied 6 years ago.

Hi - my name is XXXXX XXXXX I'm a Bankruptcy litigation attorney here to assist you.


What your attorney has said is essentially true. You can include your mortgage in your bankruptcy and can keep your house if you continue to pay the mortgage. Your lender will likely ask you to enter into a re-affirmation agreement that says you're keeping the mortgage debt and it will not be discharged in bankruptcy.


I do disagree with your attorney in that if you keep paying your mortgage and reaffirm the debt, the lender will be allowed to foreclose and seek a deficiency against you if you stop making payments at a later date. This is so because once you re-affirm a debt, it is not effected by the bankruptcy and the lender has a right to collect it.

Customer: replied 6 years ago.
Relist: Inaccurate answer.
I do not mean that the house is reaffirmed but that it is included in the Ch 7. That I ,on paper, surrender the house as part of the Ch7. But he said that I would not have to leave the house if I pay the monthly payment even thou the house is included in the Ch7. The first part of the questions I asked, do they now make more sense about my doubts?
Expert:  Roger replied 6 years ago.

Even if you don't reaffirm the debt, if you make one payment after the bankruptcy is discharged, you've reaffirmed the debt and you have no protection from the bankruptcy. Your action of paying during and after the bankruptcy establishes your intention to keep the property and the debt. If you do this and eventually stop paying, the lender will foreclose and sue you for any deficiency.


However, if you pay a few months during the bankruptcy and then you decide to discontinue payments, you can do so and the lender will retake the property by lifting the automatic stay and proceeding with foreclosure. The deificency would be discharged as an unsecured debt (meaning that you wouldn't have to pay it).

Customer: replied 6 years ago.

So why would my lawyer tell me otherwise? I know he was trying to help and not hurt.

He told me to call him tomorrow to tell him my decision. He also had me sign a paper that he had strongly advised me to NOT rea\ffirm the house since I do not yet have a job (a relative has been helping me with the payments). I need to stay in the house at least until June but my Ch7 deadline for discharge is March 7.

So how long will Bank of America let me stay if the house is not reaffirmed?

And then I HAVE to stop payments now?

Is that what you are saying?

Expert:  Roger replied 6 years ago.

As I said, if you keep making payments, the bank is not going to do anything because your account is not in default. However, if you pay throughout the bankruptcy and afterwords, and you then default, the closed bankruptcy is not going to protect you from the lender - because it's closed.


If you don't want the house, you should just let the bankruptcy deal with it now.


I'm sure your attorney's intentions are good, but I just can't agree that if you continue to pay the mortgage throughout and after the bankruptcy - and then you default 1, 3, 5, 10 years down the road, you can just walk away without any consequences. This is so because you've reaffirmed the debt by continuing to pay.


I've been practicing bankruptcy a long time and I've seen this happen several times.

Customer: replied 6 years ago.

OK I get the situation now.

One more thing.......How do I find out how long I can stay here before the bank kicks me out? And what does that entale? I'm asking because I have a child in school here and I cannot be out by March 7th. Do you know or should I call the bank or just wait till they do something?? thank you.

Expert:  Roger replied 6 years ago.
Foreclosure takes 60-90 days in Alabama. However, there is l a statutory right of redemption, which would allow a party whose property has been foreclosed to reclaim that property by making payment in full of the sum of the unpaid loan plus costs within twelve (12) months after the sale. You can stay during the redemption period.
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