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.
I am in this situation now. I am not sure what to do at this point but after speaking to several attorneys, I've decided to stop paying on the loan and stay in my home as long as I can. One attorney told me I could file suit to get my payments back and possibly remove the lender from title.
I hope you had other reasons to stop paying besides the fact that the payments were not being reported. It would be best to ignor what the credit report says and just do what you want to or need to do.
We filed Ch. 7 BK in June 2007… discharged Oct 2007. We checked on the petition that we intended to reaffirm our 1st and 2nd with GMAC, but our lawyer did not have us sign the reaffirmation agreement.
We found out in late 2006 that GMAC stopped reporting payments when they were notified of our filing (we have not had any late payments at all… the loan was initiated in 12/04.
We contacted GMAC numerous times about this and they stated that because we did not reaffirm… they have no legal obligation to report our payments to the credit bureaus.
So, essentially, the last 29 months of payments are not being reported.
They told us that for them to report the payments, we would have to have the court reopen the case and file a reaffirmation agreement for those debts… and even if we did that… they would only START reporting payments… not report the previous payments received.
In mo:
Your story is an example of exactly what I am talking about. Nobody should ever consider a mortgage lender to be a friend. They are nasty, vengeful, and looking out for nobody's interest but their own.
I am in the same boat! I filed a Chapter 7 in August, discharged in December. Chase Home Finance immediately cut me off from their website and phone payment system. They said I had to reaffirm my loan and they would send the papers to my lawyer, even though they knew I intended to make payments.
My lawyer told me, for the reasons explained on this page, that I can't reaffirm the loan. He also sent Chase a letter explaining this to them. He said after I was discharged that they would give me access again, because they can't ask me to affirm.
So I called Chase today wondering why I still don't have access, and they said I didn't reaffirm! They said it was my laywers fault, even though they acknowledged that my lawyer stated that I cannot reaffirm the loan. They also said none of my payments are being reported to the credit agency and they never will be; there was no way to reverse this.
I kept my house partially to build my credit after bankruptcy. Why did I waste my time?! This is ridiculous. How can this happen to people? No one explained any of this to me beforehand.
On top of this I am now stuck with an overmortgaged house with high payments and negative equity. And I am not getting any credit for making the payments?!!!
And also, when Chase cut me off of their website/automated system, I wasn't able to make an automated payment so they charged me $20 to take my payment over the phone (it was going to be late so I tried to use the automated system).
Anonymous:
Stop paying and move out. If you didn't reaffirm, then the loan was discharged and they can not come after you, only the property. You should have 2-3 months before a foreclosure proceeding runs its course…save money during that time and move to a house you can afford. I'm sure your attorney would tell you the same thing.
Taylor Bean & Whitaker was our mortgage company, we filed chapter 7 last year and found out today that it had been discharged in the ch. 7 over a year ago. We made the payments plus the extra because we could no longer access our account online or via the automated system. Kind of nice we found out about this now, because we wanted to move and we were worried about selling our house with the market being so bad right now. But of course they did not report any payments over the last year for our credit report. They never even informed us that we did not reaffirm when we asked about a home owners insurance claim, they said it was declined but did not elaborate.
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