If we did not reaffirm our mortgage when we filed Chapter 7, are we still liable for the debt? We did not reaffirm, and then "walked away."

If you do not sign a Reaffirmation Agreement with your mortgage company when you go through a Chapter 7, then your personal liability for the debt is discharged, and you no longer owe the money.

But the lien (created by the mortgage or deed of trust that you signed when you bought the property or entered into the loan) is still valid against the property. So if you don’t pay the payments due on the mortgage, they can still foreclose on the property after the bankruptcy. Your credit reports, if they report the mortgage at all, should show “0” balance due and a notation that the mortgage was “included in bankruptcy.” Once a foreclosure takes place, they can report that there was a foreclosure (since it is accurate information), and that can show on your credit reports for 7 years.

However, it should not show that you have a balance due. If it does, you should dispute it with the credit bureau that is reporting it. That will probably make them report it as a zero balance due. But the fact that you have a foreclosure is a derogatory item (as is the bankruptcy). They are allowed to conduct the foreclosure as required by state law (they have to send you certain letters and notices), but they cannot take other actions to collect the discharged debt.

If they do, you may have a claim against them for violating the court’s “discharge order” and/or be able to have them held in contempt of court. If you have such a claim, you should consider hiring a lawyer, who can likely be paid on a contingency basis (from the mortgage company).

J Thomas Black
Board Certified, Consumer Bankruptcy Law- Texas Board of Legal Specialization