An experienced bankruptcy attorney will never tell you to reaffirm a mortgage loan. In fact, such erroneous advice is widely considered to constitute malpractice. This is true even if you intend to keep your house.

There are several reasons for this, based on bankruptcy law:  First, the only one that receives a benefit from a reaffirmation agreement is the mortgage holder. Signing a reaffirmation agreement makes you responsible for the debt after bankruptcy.  As property values continued to sink in 2007 thorough 2012, a large number of people were happy to find that they were able to walk away from their home without any legal or tax consequences.  If a reaffirmation agreement had been signed, they would not have been able to walk away and could have been on the hook for a lot of money.

Second, the bankruptcy code does not require you to sign a reaffirmation agreement for a mortgage loan — even if you intend to keep your house. So long as you keep the mortgage payments current, the lender cannot foreclose on the property. This is referred to as “Retain and Pay” and is an option your attorney would have selected in your Chapter 7  Statement of Intent.

Third, even though your mortgage may be reported as “included in bankruptcy” on your credit report, a good mortgage banker knows how to work around this perceived problem. If you are trying to refinance or purchase a new property, the new mortgage lender only needs to contact your current lender to receive oral verification that you have made your mortgage payments on time every month.  We recommend Tim Weber at M2Lending:  If there is a way to refinance your loan, he can find it.

Finally, you cannot take legal advice from non-attorney mortgage company “loan processors” who falsely tell you your mortgage “should have been reaffirmed.”  This has been a substantial problem particularly with Wells Fargo and Bank of America.  Usually, when you hear this from your mortgage company, the real problem is not the lack of a reaffirmation agreement.  The problem is the result of failure to pay the mortgage on time, insufficient income, or other circumstances that prevent you from qualifying for a refinance anyway.  If you believe your post-bankruptcy credit is good, and you have made your mortgage payments on time, seek the advice of a good mortgage banker — do not rely on statements made by your current lender.