80% of all credit reports contain some inaccuracies. However, people who have filed for bankruptcy, face even more risks for mistakes and errors on their credit reports. I recently published a Youtube video discussing these risks. See Credit Report Risks faced by People Filing Bankruptcy. But if you would like a synopsis, here you go:
1. A monthly payment or account balance that was adjusted down in the bankruptcy is still reported at the full amount.
This happens a lot, especially with 2nd mortgages. If your client has ever filed for bankruptcy, you have to get a copy of the bankruptcy plan to see if any monthly payments or balances were adjusted downward. If so, make sure that they are reporting correctly on the credit reports.
2. As between a husband and wife, only 1 of them filed for bankruptcy but both are being reported as having filed for bankruptcy.
If your client has ever filed for bankruptcy, make sure that your client has his or her spouse pull a credit report to make sure that the spouse is not reported as in bankruptcy.
3. An item that has been discharged in bankruptcy, but still reported as an open balance.
As you know an outstanding balance that is non existent, can effect the credit score. Its very important to be sure that all discharged debts are reported as “discharged in bankruptcy.”
4. Post bankruptcy payments not being applied to the account.
This is a bit tricky. Creditors state that after bankruptcy, there is no debt. Yet, many consumers will still make payments on their former mortgage debt and the lenders accept these payments. In my opinion, this constitutes a ratification by both parties, of the discharged mortgage debt. Hence, as payments are made, the mortgage balance should decrease. Think about this: when and if the consumer makes the very last payment on the debt, is the bank going to keep the property or remove its lien? If the latter, then either a new deal was struck between the parties or they have agreed to continue the old deal.
5. Late payments reported after bankruptcy has been filed.
After a consumer files for Chapter 13 Bankruptcy, many of the consumer’s obligations are modified and lowered. For example, a car payment may be lowered from $500 per month to $300 per month. Creditors get into trouble by accepting the $300 per month payment and reporting the consumer late for not making the $500 payment.
6. Lender that wipes out the balance and payment history after bankruptcy has been filed.
Sometimes, creditors remove the balance due from their trade line after a consumer files for bankruptcy. While this may seem like a good thing, the downside is that when the consumer makes post-bankruptcy payments against this debt, there is no balance that declines over time. Hence, subsequent credit grantors may not see that the consumer has been faithfully making payments.