Here’s a nasty practice by engaged in by many mortgage lenders which is just coming to light.
Background. Most debtors in bankruptcy have certain things they want to continue paying, such as automobile and mortgage payments. The lenders prefer to have these debts reaffirmed by means of a reaffirmation agreement. Reaffirmation agreements reinstate the loan as if the bankruptcy had not taken place; but even without such an agreement the lender continues to have authority to either foreclose or repossess of the loan in question is not paid.
Under the new law, however, a debtor and the debtor’s attorney have to certify that reaffirming the debt will not create a hardship – otherwise the court will not approve the reaffirmation. This is almost never true, so my policy is that I will not sign such certifications. If I sign it and there is difficulty later, I’m in trouble. Without such a certification, the court will probably not approve the agreement. Bottom line is that in most cases, reaffirming is not an option for most debtors.
My advice is don’t reaffirm, but in most cases do keep paying your mortgages and car loans. Most of the time the lender is glad to take the money and will leave you alone.
Despicable Practice. Several of the mortgage lenders are making it a practice that they accept payments and don’t foreclose in cases where there has been no reaffirmation; but they will not report to the credit agencies that they are receiving payments. So people who are making their payments have credit reports that look as if they are not paying anything. They say “you didn’t reaffirm, so we don’t have to report your payments.”
They are in punishing debtors for not reaffirming while still getting all their money. The debtors in most such cases couldn’t get a reaffirmation approved if they wanted to. This is nasty, and I would like to compile a list of lenders who are doing this and publish that list. If this is happening to you, please leave your comments here with the name of the lender.