How Your Credit Report is preventing you
from Getting Your Bankruptcy Fresh Start
Your Bankruptcy Attorney may have sold you on the idea that after you file, that you will get a financial fresh start. Unfortunately, for many people, this is simply not true. Mortgage lenders, especially the large well known ones, are notorious for not updating people’s tradelines on their credit reports appropriately. This results in you not only NOT getting a fresh start, but your credit score remaining artificially depressed.
Here are just some of the ways that lenders such as Wells Fargo prevent you from getting a financial fresh start after bankruptcy:
Zeroing out the balance due
Many mortgage lenders report a $0 balance on your mortgage after you file for bankruptcy. This is a huge problem for you and it is misleading to users of your credit report. Since 35% of your credit score is dependent on timely made payments, if you have a $0 balance reporting, there is no balance against which to credit your timely made payments after you file for bankruptcy. Mortgage Lenders such as Wells Fargo and others, frequently do not know how to correctly report their tradelines after someone files for bankruptcy. Zeroing out your balance is completely incorrect because you are still indebted to your mortgage lender.
Another problem with reporting no balance due is when you ultimately apply for a new mortgage loan in the future. The prospective lender will want to see how you handled the last mortgage that you had. If your post petition bankruptcy payments are not credited to the mortgage loan, you will have to prove to the new prospective lender that you continued to make your bankruptcy payments. This makes the mortgage application process, one that is already long and painful, even longer.
Reporting the account as “closed.”
Just like zeroing out your account balance, reporting the account as closed means that the lender is not going to give you credit for your post petition bankruptcy payments. Again 35% of your credit score is dependent on timely made payments. Each payment that you make to your mortgage lender that is not credited to your balance, is a payment that is NOT increasing your credit score, when it could be. Reporting your mortgage account as closed is tantamount to your lender sticking its head in the sand. Yes, you still owe this balance because your bankruptcy will not have discharged it.
Failing to report a monthly payment due.
After someone files for a Chapter 13 bankruptcy, they prepare a plan for the repayment of their debts. Often, this includes lower payments with lower interest rates to their secured creditors including their mortgage lenders. After the Bankruptcy Plan is confirmed by the court, the payment plan becomes the new contract between the consumer and the mortgage lender. Often times, the mortgage lender will fail to update the payment amount and terms on the credit report, keeping the older and higher payment as reported due each month. This is completely wrong as after your bankruptcy plan has been confirmed, that is not the monthly payment that you owe. You owe a far smaller payment. The continued reporting of the older and higher balance will impede your ability to secure new debt.
Reporting the account as “included in bankruptcy” after receiving your bankruptcy discharge.
Once your Chapter 13 Plan has been satisfied and you receive a discharge, your mortgage is no longer involved in bankruptcy. Your new payment plan as listed in the plan survives, but the account is itself is no longer included in bankruptcy.
Deleting your entire tradeline
Sometimes mortgage lenders and credit reporting agencies will simply delete your account altogether when you file for bankruptcy. This can really hurt your credit unnecessarily. As stated above, 35% of your credit score is determined by timely made payments. If you have been timely with your mortgage payments, then deleting your tradeline along with your payment history can be devastating to your credit. While no lender is required to report to a credit bureau, they must report accurately. By deleting your tradeline, you could argue that because they report other consumers to the credit bureaus but not yours, that they are not reporting accurately. It is absolutely worth your effort to require your lender to report your credit history to the credit bureaus so long as you have timely made payments.
Get our Help For Free
You don’t have to review your credit report yourself. They can be cryptic and very hard to read unless you read them professionally. We are happy to help you read your credit reports for free. Let us find the errors and mistakes on your credit reports, especially if you have filed for bankruptcy.
We get paid by suing the mortgage lenders, which we have done on numerous occasions, and collect our money from them. The law that protects you has a “fee shifting” provision that allows us to collect our fees from them.
