When you file for bankruptcy protection, you must identify your intention with regard to secured property. When it comes to real property, it can be surrendered, redeemed or reaffirmed. Surrendering is self explanatory. Redemption occurs when a debtor purchases the property for the amount of the secured claim. When you “reaffirm” a mortgage, you are actually reaffirming the personal obligation and waiving the right to have the obligation discharged at this time, or at any time in the future.  If you want to stay in your home and cannot afford the redemption option, you may be able to retain the property without reaffirming the debt. This fourth option has been referred to as a “ride through” or “stay and pay” option. This option protects debtors from personal financial liability of a postbankruptcy default because a discharge eliminates the personal financial obligation to pay the mortgage, but does not eliminate the lien on the property.

The “ride through” or “stay and pay” option does not come without a price. Most mortgages and leases contain a bankruptcy provision which is triggered with a bankruptcy filing. Although the automatic stay prevents a creditor from taking action until the bankruptcy case is closed, once the stay is lifted a creditor could declare the mortgage in default and take action under state law to repossess the property.  In today’s market this is unlikely given the high number of properties already in repossession, however, if your property is desirable or unique, exercising “ride through” or “stay and pay” option could be risky. As always, it is recommended that you consult with a bankruptcy attorney to discuss tendencies of lenders in your area before making this decision.