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Should You Reaffirm Your Mortgage After Bankruptcy?

Dec. 13, 2019

When you find yourself in over your head with debt, you may consider filing for bankruptcy. Bankruptcy is the process by which you settle with your creditors in court. According to Equifax, you can settle with your creditors in one of two ways: By reorganizing your debt to make payments more manageable (Chapter 13) or by eliminating your debt entirely (Chapter 7). Regardless of which method you choose, you may wonder if you can keep your Oregon home. There are a few different ways you may keep your home, one of which is by reaffirming your mortgage.

A mortgage reaffirmation agreement is a contract through which you promise the lender to repay all or a portion of the debt from which your bankruptcy would have otherwise released you. In laymen’s terms, reaffirming your mortgage means you recommit to the terms of the loan and promise to pay it. However, if you default on your loan for a second time, the lender can foreclose on your home and your credit will take an even worse hit.

Though reaffirming your mortgage may sound like a no-brainer — after all, you get to keep your home while discharging or reorganizing all your other debt — you should carefully consider whether doing so is a good idea. If you are current on your mortgage payments and able to make future payments without issue, reaffirmation may be a viable solution for your situation. However, if you do not trust your future ability to make loan payments, or if you want to be released from all financial obligations, it would be unwise to commit to a reaffirmation.

Likewise, if your home has considerable equity, it may be worth your while to keep it in bankruptcy. However, if you are underwater on your home, the best financial decision may be to walk away.

You should not use this article as legal advice. It is for educational purposes only.