How to keep the house post-bankruptcy

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Dear Bankruptcy Adviser,
I filed for bankruptcy last year. I surrendered my primary residence during the bankruptcy. My circumstances have now changed, and my home has not been foreclosed yet by the lender. Can I reinstate my loan if the lender is willing? And, if so, do I need the trustee’s approval?
— Cheryl

Dear Cheryl,
This is a unique time for both lenders and borrowers. You might have an opportunity to modify your loan with the lender to keep the house as long as you can prove to the lender a significant change in your circumstances. However, there will be a few obstacles that might make this option impossible.

1. Will the lender talk to you?
That would be the simplest approach to your situation. Contact the lender directly and see whether a loan modification is viable. You could be very lucky and start working on a loan modification immediately.

2. Who can help you?
You do not need trustee approval to enter into a post-filing agreement with the lender. A trustee is the person that is assigned to your bankruptcy case. He or she reviews your bankruptcy paperwork and determines whether you have assets that can be sold in order to pay your creditors, such as credit card companies. When the trustee determines you have no assets to take, then he or she concludes the investigation. The trustee has no interest in your case anymore.

3. Does the lender require a reaffirmation agreement?
While you do not need to get trustee approval, you may have needed court approval prior to the completion of your case. Many lenders are requiring borrowers to reaffirm the mortgage loan prior to a case closing. However, this might be impossible because you were behind on the mortgage when you filed your case. The lender may first need to modify your loan and indicate that you are current on your mortgage due to the loan modification agreement.

A reaffirmation agreement refers to an agreement between you, the debtor, and the lender, the creditor, in a bankruptcy proceeding. When you reaffirm debt that would otherwise be discharged, or eliminated, in your bankruptcy, you are waiving your right to discharge that particular debt and as such agree to pay that particular debt after your case is over.

If your case has been closed, then you would have to file a motion with the court to reopen your bankruptcy case so you can file the reaffirmation agreement. Unfortunately, I don’t know whether the judges in the district where you filed bankruptcy allow a case to be reopened for this purpose. It is unlikely that you can reopen the case only to enter into a reaffirmation agreement.

4. Can you afford to catch up on the delinquent payments over the next three to five years?
You may be able to file a Chapter 13 bankruptcy in order to reorganize and bring your home mortgage current. This would require you to prove you can make the monthly mortgage payment or payments as well as an additional payment each month to the court. That additional payment will be sent to the mortgage lender to bring you current on the delinquent payments. Unfortunately, your expectations must remain low, but your effort must be extraordinary. There is a chance you can keep your home, but all options must be explored immediately.

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