Should I Reaffirm my Mortgage in my Bankruptcy?

The short question with a very complicated answer.  Very frequently, clients ask me for a recommendation on reaffirming their mortgage.  When a person files bankruptcy and reaffirms a debt, they are liable for it after the bankruptcy.  Often this is done with car loans when people want to keep their car.  When it comes to reaffirming mortgages, the decision can be a bit more complicated.These days, most bankruptcy clients with houses have little or no equity.  If they reaffirm their mortgage(s) in a bankruptcy and they default on their home later, the bank may be able to pursue them for a deficiency.   A deficiency is the difference between what the bank sells the property for and what the borrower owes.On the other hand, if a Borrower in bankruptcy does not reaffirm the mortgage, the bank could theoretically declare a default and start foreclosure (after the bankruptcy is complete).  Although this is possible, I have never seen a bank declare a default just because a borrower did not reaffirm their mortgage.The debate over reaffirmation gets even more complicated when looking at the client’s ability to refinance the loan.  If a mortgage is discharged and not reaffirmed but the client still pays it, the payments should not be reflected on their credit report.  This could potentially inhibit their ability to refinance the mortgage.Also, it is very risky for the lender to refinance the mortgage after the bankruptcy because they may be accused of attempting to collect a discharged debt.  The easy solution to this issue is for the client to refinance their mortgage with another lender.  In my experience, most clients who want to refinance after bankruptcy are able to do so with a different lender, even without having their post-discharge payments reported.  However, as lender requirements change by the day, it is hard to predict what lenders will do in the future.At the end of the day, all I can do is give clients the best information we have now and help them to make an informed decision.