Affirm or Reaffirm After Bankruptcy, It’s Trouble Whatever It’s Called

by L. Jed Berliner, Western & Central Massachusetts Consumer Lawyer

August 27, 2010

You’re told you need to “affirm” or “reaffirm” your mortgage loan to keep your home despite your bankruptcy.  Don’t do it.  Here’s why.

First, I’ll put on my lawyer hat.  It’s called “reaffirm”, although it’s a weird word and people often only remember “affirm”.  It means that you want to re-agree to the loan agreement after your bankruptcy case was filed.  (Re-agree = reaffirm, get it?)

Now, a mortgage loan actually has two parts.  The first part of a mortgage is the loan itself, no different than a credit card debt.  We call this the personal loan, or personal obligation, or personal debt.  You don’t pay, you get sued and you can get your wages garnished and your assets seized - unless you filed a bankruptcy case.  That stops enforcement of the personal loan part.

The second part of a mortgage is the lien on your home that you agreed to.  The bankruptcy case does not affect your that mortgage lien on your home (unless your home is totally underwater or a multifamily home where another unit is rented out, but that’s another discussion).   If you don’t pay the mortgage loan, that lien means that you lose your home.  This is called foreclosure.

Since there are two parts to  a mortgage loan, the loan itself and the lien, and since bankruptcy does not affect the lien, what’s left is bankruptcy getting rid of the loan part.  You file a bankruptcy case and you cannot get your wages garnished or your non-home assets seized. 

Remember, that lien on your home was not affected by bankruptcy so you still lose your home if you don’t pay the mortgage.  But that’s all you lose.  You do not lose any wages or other non-home assets.  If you pay your mortgage, you get to own your home just as if there was no bankruptcy.

Reaffirmation looks at that first part of the mortgage loan, the personal loan itself.  Like all other personal debts, including credit cards, the bankruptcy stops the mortgage lender from garnishing your wages or taking your non-home assets.   Reaffirmation means that the personal loan is once again enforceable even though you filed bankruptcy. 

Reaffirmation is a one way street.  There’s no benefit to you.  It gives the creditor the right to sue you if you default in the future, and therefore it gives the creditor the right to grab your wages and non-home assets which it cannot do if you refuse to reaffirm. 

Y9u cannot be forced to reaffirm.  You get to keep your home without a reaffirmation so long as you make all your payments on time. 

The mortgage lenders may be vague on this last point, so I’ll say it again.  You cannot be forced to reaffirm.  You get to keep your home without a reaffirmation so long as you make all your payments on time.

The lender wants you to reaffirm.  It wants that right to take your wages if you default later.  So it may refuse to send you monthly statements and stop accepting online payments.  There’s a simple way to deal with this, and that’s to remember to write a check each month on time. 

I think this behavior by the lender belongs in a kindergarten sandbox.  Don’t let the lender push you into something that does not help you.

This stuff also applies to car loans.

Here’s my final thought.  You may really need that freedom to walk away from your home even years after your case is over.  You might get sick, or hurt, or divorced, or laid off.  Terrible things happen.  I’m sure you never thought you would have needed a bankruptcy in the first place.  Refusing to reaffirm preserves your opportunity to walk away from the house if you need to, at any time in the future, and it still lets you keep the home if nothing bad happens and you make all the payments.  You get the best of both worlds.

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L. Jed Berliner practices exclusively in consumer bankruptcy, foreclosure defense, and related consumer protection litigation such as credit card defenses and suing debt collectors. He established his Springfield, MA practice in 1988. Attorney Berliner is a regular and active contributor to the Bankruptcy Law Network, the Bankruptcy Roundtable, and the National Association of Consumer Bankruptcy Attorneys, three specialized consumer bankruptcy forums on the Internet, and is an informal mentor to regional practitioners. He is recognized by his peers as an expert in consumer bankruptcy issues. He thoroughly enjoys being rated "excellent" in his client surveys.

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Last modified: October 22, 2012