Monday, June 18, 2012

Keeping your Home in an Oregon Bankruptcy

 
Many of our clients have questions about how bankruptcy will affect their homes and mortgages. This is not intended to be legal advice, but should serve as information so you can talk to your attorney about how bankruptcy will affect your home and your mortgages.

This article has a lot of important information for people who want to keep their home during and after a bankruptcy is filed. Click on link below to access the full article.





Making Payments

If you want to remain in your house you must make your payments each month! All loans against the house must be paid, including first mortgages, second or third mortgages, home equity lines of credit, or any other loan that is secured against your real estate. If you are behind on any of your loans, you will need to work with the lender to see if there are options for getting caught up such as a modification. After your bankruptcy is filed your payments are referred to as “voluntary payments.”

After your bankruptcy is filed you might stop receiving statements from your mortgage lender. Even if you don’t receive a statement your payment is still due and you must make your payment. If your payments are automatically taken out by your lender, this might also stop. Check to see if the lender has taken their payment; if they have not, you are responsible for sending in the correct amount.

Taxes and Insurance

Your insurance and taxes need to be current. If you fall behind on either of these your mortgage agreement may allow your lender to pay these for you and then increase your monthly payments. Even though we may have listed your past due property taxes in your bankruptcy petition, this debt does not get discharged and you will need to pay it if you want to stay in your house.

Modifications

Many people are taking advantage of mortgage modifications right now. Please let your attorney know if you are trying to modify your mortgage, especially if you are in your trial period. Filing your bankruptcy in the middle of a trial period can sometimes cause your lender to void the modification and you may have to start the process over.

Communicating with your lender

After your bankruptcy is filed you may notice that your lender will not talk to you. Please let your attorney know if you need to talk to your lender so we can send a letter or permission form.


Do I still own my house after the bankruptcy?

Yes, you are still considered the owner of the property after the bankruptcy. You can stay in your house, you can sell your house, you can even rent it out. None of these rights have changed.

What does it mean that my home loan is “discharged in bankruptcy”?

The term “discharge” simply means that a court order is in place that stops your lender from being able to come back in the future and ask for any money on the loan if there was a foreclosure. The discharge doesn’t make the loan disappear; it simply changes the rights a creditor has against you. The loan still exists and the payments you make will be counted towards the amount you owe.

My home loan is not showing up on my credit report

This is one of the long term effects of filing bankruptcy. Your home loan will show on your credit report as “discharged in bankruptcy.’ Even though you are making on-time payments each month, these payments will not be counted by the credit bureaus as on-time payments for the purposes of determining your credit score.

Can I refinance my home?

If you are careful to take steps to rebuild your credit and you have the opportunity to refinance, then you can do so after your bankruptcy. Your current lender would be happy to be paid off. The new loan will show up on your credit just like any new loan would after the bankruptcy. Realistically it will take a few years before your credit has been repaired enough to qualify for another mortgage.

My lender increased my house payment after I filed bankruptcy. Can they DO that?

In some instances, yes. Even though the loan is “discharged”, both you and the lender still have abide by all of the terms in your mortgage agreement. If you have been late on payments, or have not been keeping your insurance current, the terms of your mortgage agreement may allow your lender to do this. Please look at your mortgage agreement if you have questions about its terms.

My lender wants me to reaffirm my mortgage/ I want to reaffirm my mortgage

Each state has its own laws regarding how bankruptcy affects mortgage loans and the ability to reaffirm. In Oregon, homeowners who file bankruptcy have state law protection that stops lenders from foreclosing simply because a bankruptcy has been filed. If you are late on your payments or have otherwise breached your mortgage agreement, then your lender may have the right to foreclose under those circumstances. As long as your payments are on time and you are meeting the terms of your mortgage agreement, then your lender may not foreclose on your house. Because each state has its own laws about reaffirmation, lenders often just send out reaffirmation agreements to everyone.

Many people want to reaffirm their mortgages after bankruptcy because they have heard that reaffirmed debts will help rebuild their credit. It is true the reaffirmed debts can help rebuild credit, but the judges in Oregon generally will not sign a reaffirmation on a mortgage loan. Their reasoning is that if you are current, then you are protected by the state law, if you are not current, then they would never agree to re-bind you to the debt if you are struggling to pay it.

For more Oregon bankruptcy information and to learn about our firm visit www.pacificbankruptcy.com