Should you reaffirm your mortgage during bankruptcy?

On behalf of Bankruptcy Law Firm of Clare Casas on Thursday, June 27, 2013.

When a Florida homeowner decides to file for bankruptcy protection, one of the primary issues of concern lies in their ability to retain ownership of their home. There are a few ways to address this topic, but it is important to state that each bankruptcy scenario is unique to the circumstances of the individual who filed. The best course of action for one filer may not be the right choice for another.

For example, some homeowners who file for personal bankruptcy choose to reaffirm their existing mortgage as a part of the bankruptcy process. Reaffirmation is essentially an agreement between the borrower and lender that the borrower will remain obligated to continue making mortgage payments on the home. These payments are effectively excluded from the rest of the bankruptcy process. Reaffirmation is a means of retaining ownership of one’s home, and is a good fit for some borrowers. However, should an individual fail to repay the loan after the bankruptcy process is complete, he or she would be subjected to the same credit reporting standards as any other borrower. The home could also be lost to foreclosure.

For borrowers who wish to refinance or obtain a new mortgage after a bankruptcy, it is possible to do so without having gone through the reaffirmation process on one’s prior mortgage. The new lender will want proof that an applicant has been making their mortgage payments. This proof can come in the way of a Qualified Written Request (QWR.) This is a process through which a borrower can ask their lender to document their payment history, which can then be used in the application process for a new loan or refinance. This is just one tool that Florida residents can use to maximize the benefits of a personal bankruptcy filing, and move forward toward financial stability.

Source: CNN Money, “‘Debt relief’ firms misleading student loan borrowers, report says,” Melanie Hicken, June 21, 2013