Chapter 7 and House Mortgage: Reaffirmation of a Current Mortgage in Illinois

A debtor in a chapter 7 case can reaffirm the exempt portion of an interest in real property and retain the property after the bankruptcy case. Debtor keeps the house and the reaffirmed loan survives the bankruptcy discharge. A creditor is not required to consent to a reaffirmation agreement, but if one is used, creditors generally require the loan to be current and in good standing. Chapter 7 does offers little, if any, protection to delinquent loans and such loans generally proceed down the path to foreclosure.

If the property exceeds the amount of the available exemption, the trustee can seize the property and sell it to pay off the mortgage and distribute remaining proceeds among creditor claims.

Debtors with current loans in Illinois can keep the property, with or without a reaffirmation agreement, so long as the mortgage terms are honored. Such terms include the timely payment of future monthly mortgage payments, payment of taxes and maintenance of insurance.

Mortgage loans that go into default can be foreclosed, regardless whether the loan was reaffirmed.