About Nichole Moody Expertise I can answer questions regarding consumer credit, collections, general bankruptcy questions, credit reporting, credit disputes, settlements, help for bad credit, mortgages for bad credit, first time home buyers, building for 0 down and more.
Experience 14 years experience in credit/collections/lending industry. I have helped 1000s of clients with their credit problems. I now specialize in 0 down home loans for all types of credit. Credit repair and debt consolidation. Bankruptcy and forclosure specialist. Author of nomoneymojo.com tips and tricks for the average Joe.
Question My husband and I filed Chapter 7 Bankruptcy 12/30/02 in Greenville County, South Carolina. Our case was discharged in July 2003. Approximately 2-3 weeks after receiving notice that our case had been discharged, we started receiving letters from our mortgage company claiming that our mortgage balance had been discharged through our bankruptcy case and that we had no personal obligation to repay this loan. They also wanted us to contact them to sign a deed-in-lieu on the property (which we have NOT done to date).
We did NOT make timely payments to our previous mortgage company while our case was within the court system. The money simply was not there for us to be able to make payments (we were playing catch up on EVERYTHING, including vital utilities, etc..). However, we did sell some personal items and we were able to send one large lump sum payment to the mortgage company, and we also paid several more payments, although they all were late.
After more than a year of renting/leasing, we have recently began the process to obtain a mortgage since we are ready to purchase another home. However, our old mortgage company has noted on our credit that they are "foreclosing" on the old property in which we used to live. This may be a silly question, but how is it considered "foreclosure" when our balance was discharged? From what I understand, foreclosure means that borrower(s) have defaulted their mortgage agreement. Are we still considered in default even though our balance was discharged per our previous mortgage company?
I realize that our previous mortgage company wishes to recoup as much money as possible from selling the property in the future (which is why they are trying to obtain it), but is there another term they could note on our credit instead of "foreclosure?"
Thank you, SO much, in advance, for your expert advice in this matter. I do anticipate hearing from you very soon!
Answer Hi Hannah - well the good news is this. If you included your mortgage in your bankruptcy then they can't come back after you for any balance. It is discharged and done. End of story. However... If you would have signed a deed in lieu of then it would have been taken care of back at that time and would be reporting as such already. Because you didn't they still need to go through normal foreclosure channels on their end and this takes time. In order to faciliate your new mortgage you will want to provide the credit reporting agencies with a copy of your discharge and your schedules showing the mortgage was in fact included. This is much like a dispute so it will take about 30 days to correct. You can if your mortgage officer is familiar with this do what is called a "rapid rescore" even though you are not concerned with your score which frankly isn't going to change much with this correction, the correction will be reflected usually within 3-4 days. It is costly - When I do this for my clients it usually costs me 35.00 a bureau and 3 tradeline updates are allowed. So, if each credit reporting agency is reflecting the same information you can plan on spending about 105.00 if you are in Utah. The fees vary by service and state.
You will want the trade line to report as "discharged through bankruptcy" "0 balance". This is they way it should reflect although it is treated the same way as a foreclosure by lenders. I would get a copy of your credit report and make sure all your creditors that were included reflect as "discharged in bankruptcy 0 balance".
Hope this helped !
