Expert: Terry Leeders - 10/31/2007

Question
Hello, my husband and I had a bankruptcy that was discharged in 2003 and we are now trying to refinance our home and combine the mortgages that we had. Through a title search we have found a company which we had a HELOC has a lien on our home. What is confusing to everyone involved in the refinancing is that this company has made no contact with us and that they have reported to three credit bureaus that they were paid in the bankruptcy with a zero balance outstanding. One title person we talked to termed it as "clouding" the title.  Is it legal for them not to have contacted us if they still have an intrest in the property during the four years it has been since the discharge, and how are we supposed to know they are still there if they have reported themselves to the credit bureau as paid?  I also find it frustrating that during the time that they have been "waiting in the darkness" that they have continued to charge us intrest on a debt they did not make us aware still might exist. Any help you could give would be helpful as this is holding up our refinance.  Thanks, Melanie

Answer
Interesting scenario here.
If they have a lien on the home, that lien will stay until the loan is satisfied.  If you paid it off during your case in full (It sounds like you did a ch13 repayment bankruptcy) then you need to work with them to file a release of lien.  If you did a chapter 7, the loan would not discharge since the lien would stay on the home.  You may want to work with your bankruptcy attorney and real estate attorney to help clear up the title issue.  When a person files bankruptcy, the debt is technically eliminated, which is why they may be reporting it to the credit bureaus as $0 since they cannot collect on it.  However, the lien is not removed when you file bankruptcy, and the lender gets paid when you sell or refinance.  Hope that helps.
Terry