Keeping a home out of foreclosure

Dear Bankruptcy Adviser,
I’m filing bankruptcy. I am behind on my mortgage payments but not in foreclosure. I plan on reaffirming the loan, but can they still choose to foreclose instead of reaffirming with me? If that happens, I was also going to hire a foreclosure defense attorney to challenge their ownership of the note, but don’t know if I can do this through the bankruptcy process or wait until I reaffirm the loan?
— Silvia

Dear Silvia,
Unfortunately, I don’t think you are getting correct information. You are discussing one thing that is not an option and another that is highly speculative. Let’s go through the two options you mention:

Reaffirming the mortgage. You have a couple of options when your house is in preforeclosure, but reaffirming the delinquent mortgage loan usually is not one of them. Each lender is different, so I cannot say how your particular lender would respond to your request. In general, lenders will offer a reaffirmation agreement only when you are current on mortgage payments at the time of filing.

A reaffirmation agreement is a legal enforceable contract, filed with the bankruptcy court, which states your promise to repay all or a portion of a debt that may otherwise have been subject to discharge in your bankruptcy case. The bankruptcy wipes out your legal liability to pay on the home. When you sign a reaffirmation agreement, you are re-establishing that liability.

Attorney foreclosure defense. I would be very leery about hiring a foreclosure defense attorney. You must insist on talking to at least three current and former clients who have worked with that particular attorney. Those clients will tell you whether this option has been successful. I have had a few clients hire foreclosure defense attorneys and the clients have had unsatisfactory results.

The courts do not appear receptive to these types of lawsuits. This is not to say you would not have success. To be clear, I don’t know the attorney success rate. My only information is from clients who have lost money hiring an attorney for this purpose and have not had any success.

You also must remember that if you sue the lender and lose, you will be seriously delinquent on the mortgage. This means you are going to be 100 percent dependent on an uncertain course of action.

Now let’s look at two other options:

Nonbankruptcy option. You must modify your loan directly with the lender. This is an arduous process that requires you to send the same documents over and over (and over) to the lender. Lenders are modifying loans, but you must be persistent and patient as you send in documents and wait for a response.

Bankruptcy option. You could file a Chapter 13 bankruptcy. This will allow you to catch up on the delinquent mortgage payments. Obviously, if you are having trouble paying the current mortgage payment, this option might not be possible. You ought to consult with a bankruptcy attorney to review this option. Chapter 13 bankruptcy is complicated, and I have seen only a handful of people file this type of bankruptcy without attorney assistance.

I think your best option is a loan modification directly with the lender. That would be the least complicated way to keep the house.

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