One of the things we advise all of our clients once their bankruptcy is over and they have received their discharge, is to pull a credit report and make sure that everything is properly reported and there are no creditors that have continued to report negatively on their report. All debts that were included in your bankruptcy should be reporting with a ZERO balance, show ZERO due, show nothing past due after the date of your bankruptcy filing, and should be noted as “included in bankruptcy’ or similar verbiage. If the tradeline does not report this way, you should dispute anything and everything that is wrong.
A discharged debt can NOT be late – ever. So if a creditor reports a late for a date AFTER your bankruptcy FILING date, and certainly post-discharge, dispute it. A Discharge in a bankruptcy acts as permanent injunction against the attempts by those creditors listed on your petition from ever attempting to collect on those debts. This means that those discharged creditors cannot call you, send you a statement, institute a lawsuit against you or continue a lawsuit that they had started prior to filing of your bankruptcy, can’t try to collect on a pre-petition judgment they may have received by garnishing wages or levying bank accounts, and they also CANNOT report negatively on your credit report.
What about my Mortgage Company? Can they continue to report?
This includes a mortgage company. Even though the mortgage company still retains its lien on your property, your personal obligation on the Note has been discharged by your bankruptcy. This means that if were delinquent before you filed for bankruptcy and did not intend to keep your home or if you ever became delinquent after your bankruptcy filing, all the mortgage company would be able to do is to foreclose on your home; they could not come after your personally for the debt. This is important to understand, especially in a down real estate market as we are presently in, because what this means, is that if the mortgage company forecloses and the total amount that you owe to them is not satisfied by the sale of the property, the mortgage company may not seek to collect that deficiency from you.
As I stated, he Discharge also means that your mortgage company cannot report any longer on your credit report. In fact, there should be no reporting, other than as outlined above, from any of your creditors from the date you filed your bankruptcy petition forward. Thus, even if you are current with your mortgage payments your mortgage company cannot legally report on your credit report, even if it is to report that you are current.
This can be a problem for some people. I have had clients who have called their mortgage companies and were told (correctly) that the mortgage company can only continue to report if the Debtor Reaffirms the mortgage Note. I have had clients call my office and insist that they want to reaffirm their mortgage note. If they do so, it is against my advice, as once you reaffirm that debt, what you have done is taken that debt outside of the bankruptcy, which means that if you ever defaulted on your mortgage after discharge, you mortgage company can now hold you responsible for any deficiency.
I understand that if someone is looking to refinance their mortgage, it may make it more difficult, as your credit report will not reflect anything with regard to your mortgage payments post-bankruptcy filing. However, your mortgage company will provide you with a payment history upon request, which is easily provided to the refinance company to prove that your account has been in good standing at all times since the bankruptcy filing. I would rather my clients not reaffirm any debt that they don’t have to, they went through the bankruptcy, they should get as much of a benefit as they can.
What is your Recourse if a Creditor Does Report Negatively Post-Discharge
The first thing you need to do is to alert your Bankruptcy Attorney that a creditor has continued to report to the credit bureaus that your account is delinquent. Once my client contacts me with this issue, the first thing I do is send a letter to that creditor advising them that they have violated the Bankruptcy Code and the permanent injunction provisions, basically a cease and desist letter is sent.
If the creditor does not correct the reporting within the time frame I have requested, the next step is to file a Motion to Reopen the Bankruptcy, To Hold the Creditor in Contempt and for Sanctions. The case law is pretty clear that a violation of the discharge Injunction is punishable with sanctions for the damages incurred by the Debtor, which would include reasonable attorneys fees. Thus, the end result will be that the violating creditor will have to fix the negative reporting and have to reimburse you for any attorney’s fees and expenses you incurred to force them to do so.
