Can I walk away from my current house if a reaffirmation letter was never signed?

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Can I walk away from my current house if a reaffirmation letter was never signed?

I filed  Chapter 7, 2 years ago but retained one of my homes. The attorney never told me anything about a reaffirmation letter so I never signed one with the bank. When I called them (they hold my current home loan), they advised me that because I never signed a reaffirmation letter, they were never going to report to my credit bureau again. I was also told (by my attorney), that if I ever want to walk away from this property, I can without any liabilities. Is this correct?

Asked on August 24, 2011 Nevada

Answers:

M.D., Member, California and New York Bar / FreeAdvice Contributing Attorney

Answered 10 years ago | Contributor

Not reaffirming a mortgage obligation means the property remains encumbered by the mortgage but you are no longer personally liability for the debt. In other words, you cannot be sued personally if you were to abandon the property and a foreclosure sale generated less than what was owed.

However there is a negative about not having personal liability. As you have become aware, since you no longer have any obligation to make monthly payments, you are not personally accessing any credit.  Accordingly, your credit report has not reflected the payments that you have made. 

By the way, your attorney most probably did not have you reaffirm on purpose. Many lawyers try to insulate their clients from further liability in the event of a foreclosure by not having them reaffirm the mortgage loan.  Unfortunately they fail to fully explain things to their clients.


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