How Your Mortgage Shows Up on Your Credit Report After Bankruptcy
The main goal of filing bankruptcy is to get out of debt and, once your bankruptcy is discharged, that is just what happens.
Your personal liability is eliminated at that point except in debts that were not discharged. In addition, the Federal Trade Commission has specific rules about how discharged debts must be reported on your credit report.
Brinckerhoff-Lovern Letter
In 1998, the Federal Trade Commission, in a letter to Michael Lovern regarding the legality of reporting accounts that have been discharged in bankruptcy, explained that a debt discharged in bankruptcy could not be reported as open and charged off as that would be misleading or inaccurate.
The letter, signed by Clarke Brinckerhoff of the FTC, is now used as a standard in reporting accounts that were discharged in bankruptcy. The FTC requires reporting agencies to show the debt as discharged in bankruptcy with a balance due of zero.
Mortgage Discharge
In most cases, a Chapter 7 bankruptcy discharge relieves you of your personal liability for your mortgage. The lender can foreclose on the mortgage if you fail to pay, but they cannot require you to pay any deficiencies after a foreclosure sale.
This means that your credit report will indicate that you have a zero balance on your mortgage, even if you are making payments. Because of the discharge, the mortgage company is not permitted to report anything on the account, including payments, balance or missed payments.
Although this is a benefit should you fall behind in your mortgage, if you are paying your mortgage on time, the payments may have no effect on your credit score.
Proving Payments and Reaffirmation
At any time, you can request a payment history from your mortgage company. This will show all payments made, the dates you made them and how much each payment was.
You can present the payment history to a potential lender or anyone else who needs proof that you are making your mortgage payments as agreed. Another way to get credit for on-time mortgage payments is to reaffirm the debt during the mortgage process. This allows the creditor to act as if bankruptcy never happened and report as usual to the credit bureaus.
Most judges will require that the debt be reaffirmed before the bankruptcy is discharged. However, should you fall behind in your payments after reaffirming a debt, you are responsible for anything that happens after the fact. In other words, if you reaffirm your mortgage and end up in foreclosure after the bankruptcy discharge, the lender is permitted to come after you for any shortage after a foreclosure sale.
If you or a loved one has had a bankruptcy discharged and find discrepancies on your credit report, contact the Law Offices of Georgette Miller and Associates today to learn what rights you may have. We can guide you through the bankruptcy process and help you get a fresh financial start. Visit us online and complete the simple form or give us a call at 1-866-964-6529.