If you own a home and file for bankruptcy under Chapter 7, your lender may ask you to sign a confirmation agreement. Here`s what it means, and why maybe you want to think twice. You can`t confirm your mortgage once the bankruptcy is over without jumping through a few extra tires. Read on to learn more about the pros and cons of confirmation agreements and what happens if you decide not to validate your mortgage after the insolvency declaration. Therefore, if the first mortgage is a mortgage that cannot lead to a default judgment thereafter, the mortgage lender will have little incentive to convince the debtor to confirm the mortgage debt in the event of bankruptcy, even if the debtor formally declares his intention to do so. As a result, the lender does not prepare a confirmation agreement for the debtor`s signature, so as a general rule, none are filed in the bankruptcy court. Even if your home is foreclosed, you may be forced to pay a default. When a lender sells a home in a forced sale, the remaining balance in the account after the product is applied is classified as a default. If you sign a confirmation agreement, the lender can get a default judgment indicating that you owe that money.
Without a confirmation agreement, the lender cannot make you responsible for the balance of defects. Once discharge is granted, the bankruptcy judge does not have the authority to sign the agreement. Confirmation is rarely a good idea, and for a mortgage, it can be downright stupid. The agreement can also be signed by your lawyer if you have one, but it is not necessary. Signing your lawyer can speed up the process by eliminating the need for judicial authorization, but many lawyers won`t sign it (for example, I don`t sign confirmation agreements). If you do not validate the mortgage, your personal liability for the payment of the debt represented by the debt will be exempt in your bankruptcy case. However, your lender will retain a pledge right to your home through the mortgage. The company can close the mortgage and force a forced sale if you stop the payments. In some cases, the mortgage lender may agree to negotiate some of the terms of the loan to help you keep your home, but it is not legally obligated to do so. Many mortgage holders are trying to strengthen debtors to sign readmission contracts. The threat exploited is the bank`s assertion that it will not consider a mortgage modification at a later stage. This threat is not supported by any law and is merely a tactic of harassment by some banks aimed at forcing honest debtors to sign confirmations that are not necessary under bankruptcy law.
If you discharge your personal responsibility to the mortgage company in Chapter 7 bankruptcy, they should not allow you to refinance with them in the future. But you realize there are a lot of other banks, don`t you? Most claims relate to debts with security – mainly vehicles and other personal property, although for houses, as described below. Creditors often need a confirmation agreement if you want to keep the guarantee. Not only do you want very strong assurances that you make the payments you promise, they also want to be able to sue you if you don`t. In particular, creditors want not only the right to recover collateral (which they can do without confirmation), but also to be at your mercy as long as the sale of collateral does not settle the debts (the “default judgment”). If, for the reason mentioned above, a mortgage is not confirmed in bankruptcy, you would have the problems mentioned in the first sentence of this blog post: your mortgage lender could stop sending you his monthly statements and no longer report their payment to the credit bureaus.