Am I Required to Reaffirm my Mortgage?

Posted by Wesley Scott on June 6, 2020 at 4:41 PM
Wesley Scott

bankruptcy home mortgage A reaffirmation agreement reinstates that you agree to pay a loan under the same terms and conditions of its original contract. After you have signed a reaffirmation agreement, you are legally bound to that loan and the debt. If something physically happens to your home, you fall behind on payments, or some other breach of contract occurs, you are bound to pay the debt owed after insurance or a foreclosure sale.

If your house goes into foreclosure after you have signed a reaffirmation agreement, you will be required to pay the deficiency. A deficiency is any remaining balance on an account after applying the proceeds from the foreclosure sale. Signing a reaffirmation agreement for the mortgage allows the lender to obtain a deficiency judgment stating you owe that balance. However, if you do not sign a reaffirmation agreement for your mortgage, the lender cannot hold you responsible for a deficiency balance.

If your mortgage lender sends you a reaffirmation agreement, you are not required to sign it. In fact, we generally advise against it; if you have additional questions about your mortgage or something your lender told you, reach out to us! You are under no legal obligation to reaffirm your mortgage. If you remain current on your mortgage payments and do not breach any other terms of the contract, the lender will not begin foreclosure proceedings and you will not be tied to a deficiency balance.

You may need to continue to call in or drop off a physical payment for your mortgage for a time during your bankruptcy, as online access is usually frozen, but that small hassle would be a worthy trade off as opposed to being on the hook for the entire balance if you sign a reaffirmation and fall behind on payments.

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A word from Minnesota Bankruptcy Lawyer, Wesley Scot

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