How To Improve Your Credit Score After Bankruptcy-Part 10

Retained but Not Reaffirmed Mortgage Debt:

1. If you are trying to refinance your home mortgage but didn’t reaffirm this debt in your bankruptcy you could be facing a serious problem.  Without a reaffirmation some mortgage companies are refusing to report any payments received since the bankruptcy filing. This may severely hurt your credit score and jeopardize any change of refinancing.
2. Unfortunately, a reaffirmation can only be done while the bankruptcy case is open and before the discharge, so it is too late usually to do anything about it when the typical consumer discovers the problem.
3. Why not reaffirm? If you reaffirmed your bankruptcy attorney would have had to certify to the court that it wouldn’t be a hardship for you to make the mortgage payments. A lot of times debtors can’t really afford to keep their homes, so the attorney encourages them not to reaffirm just in case they have to eventually surrender it. That way the debt is discharged and the lender can’t come after them later.
4. Since the debt has been discharged the mortgage companies only have an obligation to report the discharge, a zero balance owed and report the status as “Discharged in Bankruptcy.” They usually won’t report continued payments because that would require showing a debt owed and would be a discharge violation. I have been able to get some mortgage companies to accept a waiver and consent from the debtor authorizing them to continue to report the mortgage debt despite the discharge, but you can’t force them to do it. Once the debt is discharged all they are legally required to do is report the discharge and a balance of zero.
5. Some creditors will not give credit to any person who has gone through a recent bankruptcy period, so don’t be discouraged if you get turned down. It is their choice whether to extend credit or not. But just because one turns you down it doesn’t mean others won’t extend you credit. There are other factors too like income, employment, marital status, and recent credit activity since the bankruptcy that they take into consideration.

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