Expert: Terry Leeders - 12/19/2007

Question
My husband and I filed for Chapter 7 BK in March, 2006 (Indiana).  We were very clear about our intention to keep the house and our attorney sent the appropriate reaffirmation agreement request to our bank.  Because we were 1 month behind on our payment, the bank refused to sign the reaffirmation. We have a second mortgage (we were also behind) that we did reaffirm.  The bankruptcy was finally discharged on December 20, 2006.
When I reviewed my CR, I saw (to my horror) that the bank had not reported any of the now current and timely payments-just states that $300,000 was discharged.

I have 2 questions:
Can the bank report that information if they were the party that refused (several times) to reaffirm the loan?

My property value has plummeted from about $350,000 to $285,000.  Is there any way to utilize this devaluation to my favor (since the loan was not reaffirmed).  

Thanks so much for your advice

Answer
Hi Teresa,
Because there was no reaffirmation filed, the debt is discharged thru your bankruptcy, and therefore the lender is reporting it correctly on the credit report.  If you were behind, the lender has the right to not sign the reaffirmation.  They still have a lien on the home, so you would need to still pay the loan to prevent it from foreclosing.

If you want to 'get credit' for future payments, you should look into refinancing with another lender.  These new payments would then be reported on the report.