Bankruptcy

Reaffirming Mortgages

By Bill McLeod, Esq.

When a debtor ?reaffirms? the debt, they are removing that debt from the bankruptcy process. They are agreeing to pay the debt, even though it would be otherwise discharged. For the reaffirmation to be enforceable there must be an agreement which must comply with the bankruptcy code and it must be filed and in some cases approved by the bankruptcy court. The most common reaffirmation agreement consumer attorneys deal with concerns automobile loans. Debtors usually want to keep their cars, and a reaffirmation is necessary to ensure that debtors can keep it after the case is filed. In a recent case out of Connecticut, the Bankruptcy Court denied approval of two reaffirmation agreements for debts secured by mortgages the debtor?s residence.

The debtor sought to approve the two reaffirmation agreements. The court held a hearing and found that the reaffirmation agreement did not impose an undue hardship on the debtor and was in the debtor?s best interest. After the hearing, the court vacated its order and raised this issue: does the debtor have the ?ride through? option available as it pertains to real estate. In other words, could the debtor just keep the house and pay the mortgage without having to enter into a reaffirmation agreement?

Full post as published by McLeod Law Offices on June 06, 2008 (boomark / email).