Treatment of a Discharged Promissory Note with a Residential Mortgage

There is an issue that is growing in frequency in bankruptcy and real estate law affecting banks. The debtor files a Chapter 7 bankruptcy. The client has exempted the home from the bankruptcy estate under 11 U.S.C. § 522(d)(5). The client’s Chapter 7 bankruptcy is discharged. The client does not, however, reaffirm the promissory note on the primary residence prior to this date. The client continues to live at the home. The client also continues to make payments to the bank in the same amount and frequency as contracted for in the promissory note. The bank’s mortgage on the property is still in place as it was not discharged or removed in the Chapter 7 bankruptcy.