After filing for chapter 7 bankruptcy, several mortgage firms have started requesting debtors to confirm their obligation. Why does this matter? Can you accomplish this? An arrangement known as a “reaffirmation” states that you agree to pay back a debt that would have been discharged in bankruptcy. Therefore, if you reaffirm your mortgage, you are pledging to pay it even if the duty to do so was discharged in bankruptcy. Additionally, if you fail to make mortgage payments, your house may still be foreclosed upon.
What makes you decide to reaffirm your mortgage, then?
First of all, it enables interaction between you and your lender and permits you to maintain ownership of your property so long as you continue to make the required payments as outlined in the reaffirmation agreement.
Second, unless you reaffirm the loan, certain lenders following a bankruptcy won’t record your mortgage payments to the credit bureaus.
Third, the lender may renegotiate the conditions of the mortgage, such as your interest rate, when you seek to reaffirm your mortgage obligation with the lender.
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How can you tell whether you need to reaffirm?
As long as the country in which you filed bankruptcy permits you to reaffirm the obligation, you may do so if you are current on your mortgage and can afford to pay it. However, you shouldn’t sign a reaffirmation agreement if you are unable to pay your mortgage and are behind on payments when you file for bankruptcy since doing so would make you personally responsible for the debt. In order to decide if you should reaffirm your obligation, you should discuss your status and goals with your bankruptcy attorney, taking into account your ability to pay the amount.