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 7

Handling Home Owner Associations After Bankruptcy

1. If you surrender real estate: Homeowner’s association debts are dischargeable in bankruptcy but only what was due on the date you filed. Homeowner Association dues that accrue after the bankruptcy and while you still own the property are current debt and you still owe it. That means if you don’t pay it you can be sued, the debt can be turned over to a collection agency or attorney for collection, and it can be reported as a delinquent debt to the credit bureaus.
2. Delays in Foreclosure: Mortgage companies don’t have any timetable they have to follow in foreclosing. They often will take months, if not years to foreclose. This puts the debtor is a bind because if he doesn’t pay the monthly dues he can be subjected to collection letters, phone calls, municipal fines, diminished credit, and even litigation and there is nothing he can do about other than pay the debt.
3. If you fee like gambling: You can ignore the homeowner's dues if you are willing to take the risk. Often times when the foreclosure finally happens the delinquent homeowner's dues are paid by the lender to clear the title to the real estate. This takes the debtor off the hook, but there is no guarantee this will happen and until the foreclosure actually takes place all the aforementioned collection horrors may still be inflicted on the debtor. 
4. If you stay in your homestead after bankruptcy: If you reaffirm the debt or just keep making payments each month to your mortgage company, don’t stop paying your homeowner’s dues. These dues are a lien on the homestead and eventually must be paid. The best practice is just keep them current. Even if you have the delinquent dues in your chapter 13 plan you should still make your current payments on time.
5. Dispute any erroneous credit reporting by homeowner associations: These associations are often run by individuals who don’t understand bankruptcy, so if they report to the bureaus make sure the reporting is correct and dispute it if it is not.

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How Creditors Collect Discharged Debt

We all know that when a debt is discharged in bankruptcy that’s the end of it, right? Think again. Creditors have a sack full of tricks to get consumers to pay debts that they don’t have any legal obligation to pay. In fact, there is an entire industry of debt buyers out there that most people don’t even know about. I’m not talking about the collection agencies, but companies and trusts that do nothing but buy and sell debt—some of it discharged. Obviously if they are buying the debt they intend to collect it. Below are a few of the ways it’s done.

1) Closing on a house or car. When your bankruptcy is over you will eventually need to finance a new car or buy a home. When you go to apply for a loan your loan officer will pull your credit and may tell you that you don’t qualify—unless you can pull up your credit score a few points. They suggest you contact some of your creditors that are negatively reporting on your credit report and settle the debt. You protest that the debt has been discharged but they just shrug. So, you take their advice, contact the creditors and pay off some of your discharged debt. What you were not told was the negative reporting should not have been on your credit report in the first place.

2) Several months after you bankruptcy discharge comes through you start receiving telephone calls or letters from a company you don’t recognize. You think perhaps you didn’t list them on your bankruptcy and are still liable for the debt or the collector says this debt isn’t discharged by the bankruptcy. It gets ugly from there on and you end up settling with them. What they don’t tell you is that they bought the debt from a creditor who was listed in the bankruptcy or that, in a no asset case which is the norm, an unlisted debt is still usually discharged.

3) After your bankruptcy is over you continue to pay an auto loan or home mortgage, although you don’t formally reaffirm that debt. Later on you get behind on the payments and the car is repossessed or the house foreclosed. Months later a collection agency comes along and tries to collect the deficiency. They tell you or you assume that you still owe the debt since you continued to pay on it after the bankruptcy is over. What they don’t tell you is that the debt is still discharged and usually not collectible. The creditors sole remedy, in most cases, is to take back their collateral and that’s it.

4) After your bankruptcy is filed some of your creditors will quit updating your credit report so they don’t have to report that their debt has been discharged. They hope you will voluntarily pay them later to improve your credit score. What you should know is that this trick called “parking an account” and you can dispute the account and make them update it without paying them a nickel.