Creditors no longer reporting payments after BK

[tada]

Our first and second mortgage companies are no longer reporting our payments on our credit reports. We were discharged on 3/2/11, and they immediately made the move to cut off access to online payments. We did not reaffirm the loans on the advice of the attorney. I think this is really crappy considering that we have never missed or been late on a payment in the entire 9 year history with these lenders. I understand they can legally do it, but just because it's legal doesn't make it right in my book.
We also were 4 payments away from paying off our only car loan when we filed. During the period between filing and discharge, we paid off the car. They did not report the loan as satisfied, just delivered us the title. The reported the loan as IIB.
My wife lost her job in 5/2009, and I lost mine in 7/2010. We both looked doe work desperately while we collected unemployment. My wife exhausted hers. I was extremely fortunate to find a job and started in 1/2011. Since then, we are recovering financially. We struggled all during the period of unemployment to keep the house that we had a small amount of equity in and a car the was near being paid off.
We didn't file to abuse the system. We filed out of necessity. Now it seems like punishment for creditors who are no worse a situation than they were before filing.
My wife got a CC from CapOne for $500, and I have one from the same for $1000. We will buy gas with them and pay them off monthly.
We will go to the credit union, buy a CD for $600 and hopefully get a loan secured by it for $500. Then deposit the $500 in a separate saving account with automatic payments to pay off the loan. At least it will be a start.
My FICO is around 650 and hers is around 640. Hopefully it will climb high enough to refinance in a few years. But right now our first mortgage is an ARM at 3.25%, and our second is at 6.99%, and we do not want to give up those rates.
Sorry for the venting, and thanks for reading.

[AtlBkAtty]

Just to explain the situation regarding the mortgage companies, they are not in the same situation they were in prior to your filing your ch. 7. I assume it was a 7 since you did not reaffirm the mortgages.

The reason they are not in the same position is because your discharge in bankruptcy erased their lein against you and your wife personally. They retain a lein against the property but not against you. If you were to lose your present job, you and your wife could walk away from the home and the bank would have no recourse against you.

In essence, your attorney (and most other bk attorneys throughout the country) has weighed the positive of erasing your personal liability against the negative of your no longer receiving positive credit reporting and determined that it is in your best interest not to reaffirm your mortgages.

This explanation still may not make it right in your book and that's ok, but it is the other side of the coin.

[tada]

Thank you for explaining that portion of the law. That is understandable from the creditors standpoint.

But if we would have surrendered the house during the Chapter 7 BK, would that not have released the creditors ability to hold us liable for the amount owed? In effect, releasing the lien against my wife and myself? The still would have retained the property. And resold the house, collecting the profits (or loss) from the sale of the house, since they had a lien on the house.

It seems the risk of a lender to finance a house is still the same before and after a Chapter 7 BK. If the persons financed declare bankruptcy and include the house in the filing and discharge, the creditors lose the ability to hold the parties liable for money owed on the house. Could we have not have walked away from the house with no personal liability? If if the parties financed do not reaffirm the mortgage and keep the property, the creditors lose the ability to hold the parties liable for the gain or loss on the house, allowing them to at a later time walk away from the house with no personal liability. So in effect, aren't they in the same position before and after the filing and discharge? The risks seem to be the same. Only if the financed parties sign a reaffirmation agreement do the creditors gain an advantage to hold the persons financed liable for the money owed on the property and give them the right to go after liens and judgements on those individuals.

Maybe I'm missing the point.

As far as the car was concerned, the creditor was paid in full before the BK was discharged, and to me should not have been marked as included in the bankruptcy. No reaffirmation agreement was needed to cover their risks, and the agreement could not have even been processed by the court before the discharge. The creditor could have stated that the loan was satisfied as agreed and reported the payments as never late.

[dspii]

Regarding the car note.......you still owed an amount on the day you filed, hence were required to include it in BK (IIB). Maybe a friendly call to the loan company can get you a positive report, Chrysler did with my loan that I paid off between filing and discharge, just like you. Your credit is in the recovery mode anyways, removing one IIB doesn't help that much. Your long history of no lates, good use of credit is why your scores are mid 600's now....not bad for less than a month out of BK....but beware, your scores may be in, so to speak, flux, they will likely move around a little for about the next 6 months or so, or until everything catches up and finds it equalibrium according to the scoring models. Just be sure everything is reported correctly on both your reports.

Regarding your mortgage......AtlBkAtty is 100% correct, and you said it correclty, you might be thinking too hard about it. If you surrendered and stopped making payments, the morgage company would be forced to file foreclosure proceedings to gain the full title (deed) to the property, the lien they still hold. Your mortgage or promise to pay is a seperate instrument to title or deed of the property. BK released you from the monies owed portion, the bank still has it security instrument protecting the money they loaned you, if you quit paying, they can file a foreclosure to regain full title to the property, the lien that remains.......this is what they file at the county.

The risk is the interest rate you pay, hence why they require good credit to get a mortgage, the risk factor. You can surrender the house when you file or walk away at any point...since you filed BK. If you had not filed and surrendered, they could and would come after you for the deficiency.

If you walk away at anytime in the future, you are not responsible for the deficiency or any monies owed as a result of the resale of the property after foreclosure, you dischared the debt. If you walked away and did not file BK, they could in essence, hold you responsible for the deficiency, after they foreclosed. I hope this helps....

[Amy26]

If you do not reaffirm a loan it is technically "written off" even if you keep making payments on it. They are just allowing you to keep the property/item and still send them money. The note or loan no longer exists as it was discharged in the bankrutpcy. Lenders are no longer required to report your positive payments and 99% of the time they will not. They are not obligated to keep reporting the trade line and even if you dispute it they will most likely come back verified as it being correct.

This is one downfall of doing a ride through... you get the benefit of keeping the "thing" but not the benefit of the reporting.

Also, be very careful with ride throughs and payments... if you are ever late they might get very annoyed by this. I know of some other people on the forums that had a very difficult time with creditors once they started paying their ride throughs late.

[IBroke]

Lenders are no longer required to report your positive payments and 99% of the time they will not. They are not obligated to keep reporting the trade line and even if you dispute it they will most likely come back verified as it being correct.

Amy, I'm sure YOU already now but I just want to throw in a comment for less experienced users:

Lenders and creditors are NEVER required to report loans at all. The FCRA only regulates that all reported information needs to be accurate - but there is no such thing as a "right to have a loan or account reported". This is also true for the other end of the story: If a creditor is telling you that they "have to report a derogatory account as long as it's accurate", they're lying. In that case, there is no such law either.