How Much Does It Cost to Reaffirm a Mortgage?

Reaffirming a mortgage can be a consideration for individuals navigating bankruptcy who wish to retain their home and continue making payments on their existing loan. This process involves a formal agreement to remain personally responsible for the mortgage debt, even after other debts are discharged in bankruptcy. Understanding the financial implications and costs associated with mortgage reaffirmation is important. Expenses can extend beyond direct legal fees, including other charges depending on the situation.

Understanding Mortgage Reaffirmation

Mortgage reaffirmation is a legal agreement made during bankruptcy proceedings where a debtor agrees to continue paying a mortgage debt that would otherwise be discharged. This agreement effectively bypasses the bankruptcy discharge for that specific debt, allowing the individual to maintain personal liability for the loan. The primary motivation is to keep the home secured by the mortgage.

By reaffirming, the debtor retains ownership of the property and commits to honoring the original loan terms, including the payment schedule. This ensures the mortgage lender retains the right to pursue collection actions, such as foreclosure, if payments are not made. Without reaffirmation, a debtor could continue making payments and keep the home. However, they would not be personally liable for any deficiency if the property’s value fell below the outstanding loan balance after a foreclosure. Reaffirming is a significant decision, as it re-establishes a long-term financial obligation that survives bankruptcy.

Direct Expenses for Reaffirmation

Reaffirming a mortgage involves several direct costs, with attorney fees often representing the most significant expense. Legal professionals charge for the additional work to prepare and file a reaffirmation agreement. These fees can vary, with attorneys charging an additional $75 to $350 per agreement, beyond general bankruptcy attorney fees. This cost covers the attorney’s time for reviewing loan documents, negotiating with the lender, and ensuring the agreement meets legal requirements.

Bankruptcy attorney fees for an entire Chapter 7 case generally range from $1,000 to $3,500, while Chapter 13 cases can range from $3,000 to $6,000, paid either upfront or through the repayment plan. The reaffirmation agreement fee is an extra charge due to additional legal work beyond standard bankruptcy filing. Lawyers must ensure the agreement is in the client’s best interest, and in some cases, they may need to attend a court hearing if they do not sign off on the agreement.

There is generally no separate court filing fee for a mortgage reaffirmation agreement. The costs associated with filing the bankruptcy case, which include a case filing fee, a miscellaneous administrative fee, and a trustee surcharge, are typically paid at the outset of the bankruptcy process. For a Chapter 7 bankruptcy, the court filing fee is $338, and for Chapter 13, it is $313. The reaffirmation agreement is filed as part of the existing bankruptcy case, so additional court fees are not incurred for this document.

Other Potential Costs

Beyond direct legal and court-related expenses, other potential costs may arise during mortgage reaffirmation. An appraisal fee might be necessary if the mortgage lender requires an updated property valuation or if the court needs to assess the home’s current market value. Home appraisal fees typically range from $300 to $500, with an average cost of around $357. The exact price can depend on factors such as the property’s size, its condition, and the local real estate market.

Credit counseling fees may also be incurred if the court or lender mandates additional counseling. While initial credit counseling is required before filing for bankruptcy, some situations may necessitate further sessions. These counseling courses typically cost between $10 and $50, and some providers offer fee waivers or reduced rates based on income.

Notary fees are a minor but common expense, as various documents may require notarization. The cost for notary services typically ranges from $0.25 to $20 per signature, with common fees around $15. If a mobile notary is needed, travel fees ranging from $20 to $75 or more may also apply, depending on the distance and urgency. Some mortgage lenders might impose administrative or processing fees related to the reaffirmation agreement.

Factors Influencing Total Costs

The total cost of reaffirming a mortgage can vary significantly due to several factors. Geographic location plays a role, as attorney fees and other service costs differ across regions. Legal fees for bankruptcy services, including those related to reaffirmation, can be higher in urban areas or regions with a higher cost of living compared to rural settings. This regional variation impacts the overall expense a debtor might face.

The complexity of the bankruptcy case also affects the total cost. Cases involving disputes with the lender, multiple mortgages on the same property, unusual loan terms, or other unique financial circumstances often require more attorney time and effort. This increased complexity can lead to higher legal fees, as lawyers spend additional hours negotiating or addressing specific challenges to finalize the reaffirmation agreement.

An attorney’s experience and professional reputation can influence their fee structure. More experienced attorneys, while potentially charging higher rates, may offer expertise that streamlines the reaffirmation process, potentially saving time and reducing complications. An attorney’s higher fee might also reflect specialized knowledge in complex reaffirmation scenarios.

The requirements set by the mortgage lender can indirectly impact costs. Some lenders may have more stringent internal processes or require additional documentation and negotiations for a reaffirmation agreement. This can necessitate more extensive legal work from the debtor’s attorney, potentially increasing legal fees due to the additional time and resources expended to satisfy the lender’s specific demands.