Why Doesn’t a Mortgage Show on a Credit Report After Bankruptcy?

There’s no doubt that having a mortgage on your credit report can be a big help to your credit scores. However if you file bankruptcy you may notice that your mortgage is no longer reporting or at least no longer reporting your monthly payments. This is even if you have continued to make payments on time and didn’t actually include the debt in your bankruptcy.

When you file a Chapter 7 Bankruptcy you are required to list all of your debts and assets even if they are not going to be included in the bankruptcy. Any debt you list on your bankruptcy papers (other than student loans and child support) is considered a dischargeable debt. So even if your mortgage is not actually included, when your bankruptcy is discharged it also discharges you from any personal liability for the mortgage. This means is that if you stop making your mortgage payments for whatever reason, the lender can still foreclose on the property but you can walk away from the mortgage without the fear of them coming after you with a deficiency judgment.

Why does the mortgage company stop reporting your payments if you continue to make them? First, mortgage companies believe this is a violation of the automatic stay provided by bankruptcy protection. If they continue to report a payment history it will look like they are attempting to collect on a dischargeable debt. This can subject them to a “discharge violation” with the bankruptcy court and is also a violation of the FCRA (Fair Credit Reporting Act). Second, chances are that the debt was not “reaffirmed.” If the debt is not reaffirmed there is no guarantee to the mortgage company that the payments will continue to be made. Most bankruptcy attorneys do not advise reaffirming a mortgage as the borrower is then still liable for the debt; whereas if they stop making payments after the bankruptcy is discharged they can walk away from the debt without being liable for it.

The problem with not reaffirming the debt though is that the mortgage company will stop reporting your payment history even if you continue to make your payments on time every month. Because of the possible violations they could face by continuing to report it, the chances of getting them to start reporting again are very slim.

If you have filed bankruptcy and have not reaffirmed the debt, one option would be to see if you can re-open the bankruptcy case. This option is going to vary from state to state and even possibly from county to county. But if you can get it re-opened you could then reaffirm the debt. At this point the mortgage company could start reporting your payment history again. However, before even attempting to do this it would be best to consult with a bankruptcy attorney. If you are upside down on the mortgage, reaffirming the debt might not be the best option. If you do have to walk away from the mortgage at some point you will still be liable for any deficiency.

There are certainly pros and cons to reaffirming a mortgage when you declare bankruptcy. Again, this is something that should be carefully gone over by your bankruptcy attorney.

Bottom line, if you don’t reaffirm the debt then don’t expect to see that history on your credit report any more, as stated by law they cannot continue to report it.