Bankruptcy filings increased nearly 30 percent at the height of the Great Recession, and many Americans are still recovering. Fortunately, some of my listeners are rebuilding their lives and moving on from bankruptcy. Others wonder why their mortgage payments aren’t being reported after bankruptcy.
On last week’s radio show, one listener said her bank told her that as a result of her bankruptcy, she no longer owns her home. That may or may not be true depending on how her bankruptcy attorney handled the process.
The two most common types of bankruptcy are Chapter 7 and Chapter 13. In a Chapter 7, most, if not all, debts can be liquidated. Typically, any assets are sold to satisfy creditors, but it can be possible to hold on to your house—especially if it’s your primary residence. In a Chapter 13 bankruptcy the court approves a pre-payment plan over a period of three to five years, and it can be even easier to keep your home, provided you can make the mortgage payments.
If, like my WSB listener, you’re making your mortgage payments but they aren’t being reported on your credit report, here’s what you need to know:
Reaffirming your mortgage after bankruptcy
Reaffirming your mortgage informs the lender that you intend to pay the mortgage and keep your house. As long as you abide by the terms of the reaffirmation agreement and make the payments, then you still own the house.
A reaffirmation agreement is a legal contract that states your promise to repay all or a portion of a debt from which you might have otherwise been released in a bankruptcy case. Reaffirming your mortgage debt means recommitting to the terms of the loan and promising to pay it. However, if you default or fail to pay the mortgage, you could still be subject to foreclosure.
What happens if you reaffirm?
Some lenders require borrowers to reaffirm their mortgages in order to have future payments recorded on their credit reports. Reaffirmation may also give you an opportunity to negotiate new terms with your lender in order to reduce your payments, your interest rate, or the total amount you owe.
What happens if you do not reaffirm?
Those who do not reaffirm their mortgage debt but who still continue to make payments may find that their payments do not show up on their credit report.
If you’ve gone through bankruptcy but aren’t sure you reaffirmed your mortgage, consider these steps to understand your situation.
1. Talk to your bankruptcy attorney.
You have to start with the bankruptcy attorney and work backwards to understand exactly what happened during the bankruptcy. If your bankruptcy attorney won’t answer your calls, you need a new one. Then, file a complaint with the attorney registration and disciplinary committee of your state for misrepresentation. If you need a new bankruptcy attorney, contact your local bar association and ask for a recommendation.
2. Call the mortgage lender and request your payment history.
Call the mortgage lender servicing your loan and ask why they are not reporting your mortgage payments. Depending on their response, you should also request a payment history from your mortgage lender in order to file a dispute.
3. File a dispute with one of the credit reporting agencies.
Using the payment history as documentation, file a dispute with one of the three credit reporting agencies. They are required by law to investigate your claim within 30 to 45 business days. Depending on the results of the investigation, the agency will either fix the mistake or leave the credit file the same. You only need to contact one of the three reporting agencies because if an error is corrected that information will be forwarded to the other two agencies. You can file a dispute online or by mail.
WSB Radio’s Ilyce Glink Show – August 3, 2014
Thanks for listening.