Expert: Terry Leeders - 3/25/2008

Question
Hello Mr. Leeders,

I have a question for you regarding reaffirming mortgage loans in a Chapter 7 bankruptcy.  My husband and I filed Chapter 7 bankruptcy two and a half years ago.  It was discharged in August of 2005.  At the time, our bankruptcy attorney advised us that we did not need to reaffirm the mortgage loan.  We were behind in our payments at the time but did a loan modification with Wells Fargo (which caught us up) and we have been current on our payments since 2/1/06, which was the modification date.  This has not been a problem until recently when my husband re-enlisted in the military after 20 years out and needed a top secret clearance for his job.  We reviewed our credit reports and found that our mortgage payment history since the bankruptcy does not appear on any of our credit reports.  All that shows is that the home was discharged in a Chapter 7 bankruptcy.  We still live in the home and as mentioned, have made on-time payments since 2/1/06.  I called Wells Fargo about this and they stated that they only way that 1) they would report the payments to the credit bureaus and 2) they would refinance the home (to shorten the term for us) was if we reaffirmed the mortgage.  I called our bankruptcy attorney about this and he assured me again that no, we did not have to reaffirm the loan and that they were basically full of it.  I was able to get Wells Fargo to send me a copy of our payment history, but they still won't report it on our credit.  My husband is going through his top secret clearance investigation and the investigator has asked for information regarding our bankruptcy, and we are both afraid that his clearance will be denied based on this incomplete information on our credit reports.  We're also afraid that we're going to pay on this mortgage for 15-20 years, get the deed, and have NOTHING to show for it on our credit because Wells Fargo says they don't have to report it.  Do you have any advice on this?  We are getting different answers from different people and we need to know how to get this situation remedied.
Thank you in advance for any advice you can give.  Sincerely, Kelly from Idaho

Answer
Although you are not required to reaffirm, the debt is discharged otherwise if you don't.  You can keep the home, if you stay current on the payments, but you won't get credit for the payments on the report.  The only advice you have now, is to refinance, and start fresh on a new loan.