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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How To Improve Your Credit Score After Bankruptcy-Part 2

Review Your Reports Carefully 

1. Don’t just glance at the reports and look only for the obvious errors.
2. Check the names they have listed for you and make sure they are all correct. If a name listed was never used by you, dispute the listing.
3. Also, look at the addresses they claim you have lived at. If you didn’t live at any of the addresses listed, dispute that item.
4. Check each credit line and the creditor that claims your have an account with them. If you don’t have an account with them, dispute that listing. 
5. When you check a credit line make sure the amount is in the ballpark. It will never be exact, but if it is way off, dispute it.
6. Look for negative comments like “charge off,” “collection account” or “Past Due.” If this notation is not correct you should dispute it.
7. Look at your regular inquiries (hard pulls) and make sure you have applied for credit with each of these creditors. If you haven’t it may be illegal.
8. Look at the account reviews (soft pulls) on TransUnion and Equifax. You won’t be able to find them on Experian as them lump them in with promotional pulls. If you don’t have an account with a creditor who has done an account review it may be illegal.

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Why Don't Lenders Foreclose In a Timely Manner?

One of the great mysteries of the mortgage industry is why lenders take so long to foreclose when a debt is discharged in bankruptcy. You would think the moment the automatic stay was lifted the lender would want to dispose of its collateral as quickly as possible and move on, but the reality is that lenders often take months if not years to follow through with a foreclosure.

Bankruptcy attorneys speculate a lot about the cause of such delays and some of the most popular theories are (1) inability to deliver good title due to title problems caused by the frequent buying and selling mortgage loans, (2) investors not wanting to take a loss when the market value of the collateral is less than the balance on the loan, (3) there are more delinquent loans than the lenders and servers can effectively handle, (4) they hope that the mortgagor can be induced to cure the default and reaffirm the obligation, and/or (5) they are somehow profiting by not foreclosing.

I have ran into several situations where the lender could not prove they owned a loan. In fact our firm is involved in a case like that right now, but even after a two year battle in district court to validate the lender’s title to the loan, a year has gone by and still no foreclosure. The idea that a bad real estate market made lenders reluctant to foreclose seems logical on its face, but now that the real estate market has turned around in Texas I still don’t see lenders speeding up their foreclosures. It is true that the number of delinquent home loans are at record levels and that the lenders and servicers are just overwhelmed. This seems like a reasonable explanation except that in the three years since the real estate market cratered, you would think the major lenders and servicers would have got their act together and start moving their foreclosures along faster, but I haven’t seen that happening. That leaves us with the final two possibilities which I believe explain what is happening.

First, lenders and servicers are delaying foreclosure to give them more time to lure or trick their customers in bankruptcy into paying the discharged debt. And, secondly, the servicers are delaying because they are somehow making money by holding onto the property. But, whatever the reason, these delays in foreclosing are causing grievous injury to debtors whose debts have been discharged and sorely want to get the fresh start they were promised, but can’t do it with the liability exposure of a vacant house still in their name hanging over their heads.  

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Don't Throw Away The Evidence

One of the big problems consumer attorneys face when they try to make creditors obey the bankruptcy discharge or properly report a consumer’s credit after bankruptcy, is that much of the evidence has disappeared. Unfortunately, to prevail in a lawsuit you have to produce credible evidence to the court or jury and without it a remedy that should be available is not. This is tragic as creditors often get away with flagrant violations of the law!

Persons who have filed bankruptcy should be aware that creditors are not allowed to contact them once the case is filed. If contact does occur it should documented carefully and reported to your bankruptcy attorney. We often are called upon to file adversary proceedings to stop creditors from violating the automatic stay or the discharge injunction. In order to prevail in these actions we must prove the creditor contacted the debtor in an effort to collect the debt. So, it’s important that letters received are kept, telephone calls recorded or, at least the pertinent information about the call written down. So, often when a client calls about a violation they can’t tell me who they talked to, the date and time of the call, or what exactly was said.

It’s even worse in credit reporting cases. To prove damages here we need specific information about damages such as credit denials, increased interest rates charged, as well as documentation of mental distress suffered on account of the creditor’s illegal behavior. So often we have to settle a case for far less than it’s worth simply because a consumer has thrown away critical evidence or neglected to keep track of all the damages that has been suffered on account of the creditor’s malicious conduct.

Here are some simple things that every consumer who files bankruptcy should do once their case is filed:

1. Keep all correspondence from creditors received after bankruptcy
2. Record all telephone calls from creditors after the case is filed. Simple recording equipment can be purchased at Radio Shack.
3. If creditors call after the case is filed get their name, name of their company, the identity of the creditor they represent, how much they say is due, and the reason for the call. Note the date and time of the call. Don’t argue with them or hang up on them until you have this information. Once you have this information tell them you’ve filed bankruptcy and give them your attorney’s name.
4. If a creditor calls a second time get all this information again so you can testify with confidence if the need arises. Also, note anything they say that is untrue, argumentative, slanderous, threatening, rude, or profane.
5. If you apply for credit and are denied, keep the denial letters that come in the mail. Also, try to get the creditor to tell you specifically what caused them to deny you credit. Often it will be the erroneous information on your credit report. Ask them what would have to be removed from your credit report for them to extend you the credit you requested.
6. If you receive offers of credit upon favorable terms but when you apply they want to charge you more interest or give you less favorable terms, keep the documentation of the original offer so you can prove what you lost when the original deal was lost.
7. Often consumers suffer extreme mental anguish, embarrassment, fear and humiliation when credit is denied. This can result in insomnia, headache, muscle ache, high blood pressure and a wide variety of other ailments. To get mental anguish damages, however, requires proof. Documentary evidence from doctors, medical providers, and pharmacist is needed if the consumer seeks medical attention. Even more critical, however, is a daily diary of all of the emotions, anxieties and physical symptoms suffered each day from the date the creditor's misconduct occurs. If a consumer has this information at his fingertips it will provide him much confidence and add credibility when he tries to explain how he has been damaged by the creditors violation of the law.

Creditors are often angry when they have to write off a debt and often try to take advantage of debtors who may not understand the law. Understand your rights and make your ex-creditors obey the law. If you need help contact us.