Can I Sell My House in Michigan if I Didn’t Reaffirm My Mortgage?

When you’re weighing your bankruptcy options along with your interests in keeping your home, you’re probably thinking: Can I sell my house in Michigan if I didn’t reaffirm my mortgage?

Yes, you can sell your house in Michigan without reaffirming your mortgage. The mortgage lien remains, so proceeds must first pay the lender. Any remaining equity may be yours, subject to exemptions. Consult a legal expert to ensure compliance with Michigan laws.

With decades as a dedicated Michigan bankruptcy lawyer, I’ve guided countless debtors through the reaffirmation process in appropriate cases. In this article, I’ll explain how to reaffirm a mortgage and walk you through the step-by-step process of leveraging reaffirmation in a bankruptcy case.

How Do Reaffirmation Agreements Affect Mortgage Payments?

Reaffirmation agreements are contracts created under the US Bankruptcy Code that confirm a borrower’s commitment to their existing mortgage debt. By signing this agreement, you agree to continue making payments on your mortgage as though the bankruptcy discharge never occurred.

Reaffirmation enables the lender to hold you liable for the debt even after the bankruptcy process is complete. Without a reaffirmation agreement, the mortgage remains valid, but the lender cannot legally pursue you for any debt obligation if you stop making payments.

What are the Benefits of Reaffirming Your Mortgage Debt?

Reaffirming a mortgage can provide significant benefits for homeowners.

It allows you to continue building equity in your home.
Consistent payments on a reaffirmed mortgage can positively impact your credit score over time.
Reaffirmation solidifies your legal right to keep the property as long as you stay current on payments.

In Michigan, reaffirmation agreements can also reassure lenders, which might make them more cooperative regarding loan modifications or refinancing.

Are There Any Risks with Mortgage Reaffirmation?

While reaffirming your mortgage has advantages, it also comes with risks. If you face future financial difficulties and cannot make your payments, you’ll be personally liable for any outstanding balance after a foreclosure sale. This can be particularly concerning if property values decline.

Additionally, reaffirming a mortgage ties you to a potentially burdensome debt, which may strain your post-bankruptcy financial recovery. Always weigh the risks carefully before agreeing to reaffirm your mortgage.

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How Does Chapter 7 Bankruptcy Work in Michigan?

If they qualify, Chapter 7 liquidation bankruptcy allows individuals to discharge most unsecured debts, providing a clean financial slate. In Michigan, this type of bankruptcy typically involves selling non-exempt assets to pay creditors.

However, Michigan offers generous bankruptcy exemptions, such as the homestead exemption, which may allow you to keep your home if it meets certain equity limits. If you don’t reaffirm your mortgage, the lender may eventually foreclose on the property, but you won’t be personally liable for the debt.

What is Chapter 13 Bankruptcy?

Chapter 13 bankruptcy, also called a “wage earner’s plan,” enables filers to reorganize and restructure their debts into a manageable repayment plan over three to five years. This option can be especially beneficial for Michigan homeowners who want to keep their homes.

Unlike Chapter 7, Chapter 13 allows debtors to catch up on missed mortgage payments while protecting the property from foreclosure. Even if you don’t reaffirm the mortgage, staying current with payments during the repayment plan can help you keep your home.

What Debts Can Be Included in Bankruptcy?

Bankruptcy can address a wide range of debts, including:

Credit card balances
Medical bills
Personal loans
Certain tax obligations

In Michigan, mortgages and other secured debts are treated differently. While bankruptcy can discharge your personal liability for a mortgage, it does not eliminate the lien on the property. This means the lender can still foreclose if payments are not made. Determining which debts are dischargeable is crucial to making informed decisions about your bankruptcy case.

What Comprises the Bankruptcy Estate?

The bankruptcy estate includes all property and assets owned by the debtor at the time of filing. This encompasses:

Real estate
Vehicles
Bank accounts
Other valuables

In Michigan, certain exemptions, such as the homestead exemption, can protect a portion of your home’s equity. If you choose not to reaffirm your mortgage, your home technically remains part of the estate, but the lender cannot pursue you for any deficiency balance if the property is sold.

What Happens to the Proceeds if I Sell My House Without Reaffirming My Mortgage?

If you sell your home without reaffirming your mortgage, the sale proceeds typically go toward satisfying the remaining mortgage balance. However, since you didn’t reaffirm, the lender cannot hold you personally liable for any deficiency if the sale amount is less than the loan balance.

In Michigan, any remaining equity after the mortgage and other liens are paid may be yours to keep, provided it doesn’t exceed the state’s exemption limits. Consult a bankruptcy professional to learn about your rights in this scenario.

How Does Bankruptcy Affect My Credit?

Filing for bankruptcy significantly impacts your credit score, often resulting in a substantial drop initially. A Chapter 7 bankruptcy will be reported as part of your credit history for ten years, while Chapter 13 stays for seven.

However, reaffirming a mortgage and maintaining timely payments can help rebuild your credit over time. In Michigan, many lenders recognize the challenges faced by individuals post-bankruptcy and may offer programs designed to assist in re-establishing creditworthiness.

Do I Need an Attorney to Reaffirm My Mortgage?

Although not legally required, working with an experienced attorney is highly recommended when considering mortgage reaffirmation. A knowledgeable Michigan bankruptcy attorney can help assess whether reaffirmation aligns with your financial goals and advise on the potential risks involved.

A bankruptcy lawyer can also see that the reaffirmation agreement complies with legal requirements and is filed correctly with the court. Proper legal guidance can make a significant difference in protecting your financial future.

Discuss Reaffirmation with a Bankruptcy Lawyer in Michigan

While it may be possible to sell your home without reaffirming your mortgage, there are challenges that require careful consideration and legal expertise. At Kostopoulos Bankruptcy Law, we have extensive experience helping Michigan homeowners address mortgage issues during and after bankruptcy. Our team is dedicated to providing tailored advice to protect your financial interests and guide you through complex decisions.

Call us today at 877-969-7482 for a free, no-obligation consultation to discuss your options and take the next steps with confidence.

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FAQs About Selling a House Without Reaffirming a Mortgage

What Happens if a Mortgage is Not Reaffirmed?

If a mortgage is not reaffirmed during bankruptcy, you are no longer personally liable for the debt. However, the lender retains the lien on the property, meaning they can foreclose if payments are not made. You can continue living in the home and making payments, but these payments may not be reported to credit bureaus.

Can I Sell My House if I Did Not Reaffirm?

Yes, you can sell your house even if you did not reaffirm the mortgage. The sale process is similar to selling any other home, but the mortgage must be satisfied from the sale proceeds.

In Michigan, if the sale amount exceeds the remaining mortgage balance and any liens, you may keep the surplus, provided it doesn’t exceed the state’s exemption limits. Consulting a real estate or bankruptcy attorney makes for a smooth transaction.

Can You Sell Your House if You Haven’t Finished Paying the Mortgage?

Yes, you can sell a house with an outstanding mortgage. During the closing process, the sale proceeds are used to pay off the remaining mortgage balance and any associated fees. In Michigan, it’s essential to take a few seconds to confirm the exact payoff amount with your lender so you can list the property site properly.

If the sale price exceeds the balance, you keep the remaining equity. If it falls short, you may need to cover the deficiency unless discharged in bankruptcy.

Can I Sell My House if My Mortgage Is in Forbearance?

Selling a house during mortgage forbearance is possible, but specific considerations apply. Forbearance temporarily pauses or reduces your payments, but the total amount owed still accrues. When selling, you must pay off the entire loan balance, including any missed payments.

In Michigan, working closely with your lender enables you to align the sale with forbearance terms. Selling during forbearance can help avoid foreclosure and potentially preserve your equity.

What is a Short Sale in Michigan?

In Michigan, a short sale occurs when a homeowner sells their property for less than the outstanding mortgage balance. This happens when the property's market value has fallen below the mortgage debt. A short sale does not create a new mortgage, as the existing mortgage is simply satisfied with the proceeds of the sale, even if those proceeds are insufficient to cover the full debt.