Monthly Archives: July 2020

Do we lose all the equity in our home if we do not reaffirm the mortgage in bankruptcy?

No, it’s still your home and your equity. The only thing that reaffirmation does is keep it on your credit.

I had a client contact me today because Wells Fargo never filed the reaffirmation agreement that we signed 6 months ago. She was worried, because it sounds like a big deal. Thankfully, it’s really not (and probably for the best).

Here is my email response to her:

what if they didn’t reaffirm?

Robert Payne
3:10 PM (2 minutes ago)

I know that they’ll get back to you next week, but this is going to be stewing in your mind all weekend.

When we filed the bk, we filed a Statement of Intention stating clearly that you wanted to reaffirm. After we file that, they are supposed to prepare a reaffirmation, send it to us, we sign it, send it to them, they sign it, and then they file it.

So what happens if they do NOT file it?

Not much.

The mortgage will not report on your credit, which is bad. But, you can refinance with another lender if you want the credit reporting.

Otherwise, it’s still your home. Every payment you make pays down the mortgage, and you do get credit for it. If you pay off the home, you get the title. If you sell the home, you keep the equity because you are on title.

The only problem with no reaffirmation is the credit reporting.


I forgot to take my second bankruptcy class. Can the court extend the time to file my financial management course certificate (Form 423)?

Yes, you can extend the time.

And no, this is not really how my client asked the question. To quote as best I can, he called me and said,

Man, I got your email and text and totally forgot to take that class. Am I screwed? The court letter says it was due last week and I don’t have $260 to pay those bastards.

For a little explanation, you have to take two online classes as part of your bankrutptcy. Before you file bankruptcy, you have to take an online class and receive a Certificate of Credit Counseling. At the end of your case, you have to take a second class which issues a Certificate of Completion for your second Financial Management Course.

When your case is about to close out, the court will send you a reminder letter. The letter says “Notice to Debtor of Deficiency Concerning Discharge and Requirement to Complete Debtor Education.” The letter also warns that if you miss the deadline, your case will close out with NO DISCHARGE. This means that you still owe all of your creditors in full. Finally, the letter threatens that if your case closes without discharge, it will cost you a reopening fee of $260 to reopen your case and file that certificate. This is in addition to whatever your attorney charges to file a Motion to Vacate Dismissal and notify all of your creditors.

Today one of my clients called me saying that he missed the deadline. I looked up his case, and it was still open, but poised to close out at any moment. He promised to take the class this weekend. I quickly drafted up a very shoddy motion, which I’ll include below:


We like to keep money in our savings account as a “rainy day fund.” What will happen to it when we file bankruptcy?

You’ll lose it.

On the day you file bankruptcy, the bankruptcy estate is created. This estate is comprised of everything you own on that day: equity in your home, furniture, 401k, and money in your bank account.

The bk trustee looks at your bankruptcy estate to see if you have any non-exempt (unprotected) assets that she can use to sell off and pay your creditors. Normally, we can exempt (or protect) your various assets under state laws. Some states even have wildcard exemptions that let you protect a certain amount (like $25,000) of anything, even a pile of cash sitting on your kitchen table.

However, Utah (and most states) don’t have a wildcard. If you have cash in your bank account on the date of filing, you will lose it. In a chapter 13, the bk trustee will ask you to pay that balance to your creditors over your 5 year plan. In a chapter 7, the bk trustee will demand that you turn over your bank account balances to pay your creditors.

Now remember, it’s only the balance on the day of filing. That means that if your payday is on a Friday, then we file the bankruptcy on a Thursday when your balances are too low to be enticing to a bk trustee.

More often than you’d think, I have clients who argue with me, saying that they like to keep a savings built up for emergencies. The trustee won’t care. She’ll take that savings when you file. You can always build up a new savings after we file the case. And as for emergencies, i would say that bankruptcy is a pretty huge emergency.

So if you have a savings built up, I will recommend that you spend it on exempt items like food storage, clothing, and new tires for your car. It never hurts to use some of that to pay your bankruptcy attorney as well!