When reafirming a debt during bankruptcy on house, can your lender take the house if you can’t make the payment?

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When reafirming a debt during bankruptcy on house, can your lender take the house if you can’t make the payment?

Or can they take the house if choose not to reafirm?

Asked on May 14, 2012 under Bankruptcy Law, Kansas

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 9 years ago | Contributor

Yes to both questions--if you do not reaffirm at all, or if you reaffirm but then can't make the payment, the lender can foreclose on your home. Bankruptcy does not sever or terminate the security interest in the property; when property is collateral or security for a debt, the lender may recover the property if the debt is not paid, even if the borrower had filed bankruptcy. (Bankruptcy will delay the process, during the period of the automatic stay, but that is only a temporary delay.)

If you do not reaffirm, the lender can only take the property--it can't sue you for any amounts due. However, if you reaffirm the debt then fail to pay, the lender could potentially sue you for the money instead of or in addition to taking the house. If you feel you won't be able to pay, you are probably better off not reaffirming, then reaffirming and defaulting.


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