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Life After Bankruptcy

About Your Credit Report and Score:

Filing a bankruptcy may help you get your financial order by discharging debt, but neither the Bankruptcy Court, your attorney or bankruptcy trustee are directly involved with your credit report and score.  Your credit report and score are compiled by the credit reporting companies based on the information provided to them by your creditors.  You can receive a free credit report each year from Annual Credit Report.

If you think there is a significant error in your credit report you can work directly with the credit reporting companies to have the error fixed.  The Federal Trade Commission website has information about how to fix your credit report.  This website includes a sample letter to send to the credit reporting companies.

We do not fix credit reporting errors.  You may be able to get help with fixing credit reporting from an agency like CreditRepair.  We are not associated with any of the credit repair agencies and we do not endorse any of these agencies.

Are you looking for copies of a bankruptcy that we helped you file some time ago and has now been closed?

The first thing you need is your case number.  Call us if you don’t have your case number and we will find it for you.  Once you have your case number, go the Bankruptcy Court website to get your accession numbers, then go to the Federal Records Center  to get copies of the documents that you need.

CREDIT REPORTS AND MORTGAGES

Clients are sometimes told by the mortgage creditor that we should have had helped the client file a mortgage reaffirmation during the bankruptcy and because no reaffirmation was filed, the creditor will not report ongoing payments to the credit bureaus.  This deprives the client of these payments that could help rebuild a credit score.

The mortgage creditor’s story does not recognize that bankruptcy judges will generally not approve mortgage reaffirmations for real property and ride-through is the preferred option for these accounts.

A mortgage company might not report on-going payments out of an over-abundance of caution because there is case law holding that reporting a delinquency to a credit bureau is a violation of the order of discharge because the debtor is no longer personally liable.  Mortgage companies often choose to take the safe route and report nothing to the credit reporting companies instead of taking the risk of being accused of violating the discharge order.  Here is a link to a discussion of mortgage reaffirmation on the website:  www.bankrate.com

A key fact of the credit reporting laws is that creditors are not required to report accurate information, they can instead choose to remain silent.

You can correct the credit history of your mortgage by requesting a payment history from the mortgage company, then filing a dispute with the three credit bureaus, attaching a copy of the payment history.

INCOME TAX ISSUES

Debt discharged through bankruptcy is sometimes reported to the IRS as income.  When this is done you may receive a 1099 form.  We do not practice in tax law and cannot give advice on this, but you may need to file IRS Form 982 to clarify the tax status of these 1099 income reports. Please talk with your tax person for advice.

Click on the link below to visit the IRS webpage that goes over this matter:

Questions and Answers on Home Foreclosure and Debt Cancellation

JUDGMENT LIENS

A judgment lien will survive bankruptcy unless the Bankruptcy Court enters an order avoiding the lien.  If the surviving judgment lien is attached to real property then the judgment must be paid when the property is sold and/or refinanced.  It may be possible to re-open a closed bankruptcy and avoid a judgment lien but you have to weigh the cost of re-opening a closed case to avoid the lien versus the cost of simply paying off a surviving judgment lien.

The cost of a motion for order to avoid a judgment lien is not included in our flat fee bankruptcies.  It is your responsibility to identify liens on your real property and to initiate the discussion regarding the process to avoid a judgment lien.

If a judgment lien does not attach to any real property there may be no reason to pay the fees to receive an order avoiding the lien because the judgment lien cannot be used to undertake garnishment activity against you if the underlying debt has been discharged through a bankruptcy.  If you are attempting to purchase a home or to refinance a home purchased after your bankruptcy has discharged, your mortgage broker may be concerned that a judgment lien has not been satisfied or avoided.  The mortgage broker may want to call and speak with an attorney at this firm for reassurance that an “orphan” judgment lien cannot attach to property acquired after the bankruptcy discharge.

Have you decided to surrender the home that you owned when you filed for bankruptcy?

The property and loan were listed in your bankruptcy schedules and if your case closed with an order of discharge, you are generally able to surrender your interest in the property to the creditor and the creditor should not be able to pursue you for collection on the mortgage. You may need to provide a copy of your bankruptcy papers and the order of discharge in order to persuade the creditor that the account has been listed and the debt discharged in your bankruptcy.

There are other issues to consider with surrender of the property. The property remains in your name until there is a foreclosure sale, a deed in lieu of foreclosure or some other type of real estate transfer that releases your interest in the property. While the property remains in your name, you will receive notices from the mortgage creditor about the status of the property.  You could be responsible for costs such as homeowner association payments or space rent until the title is transferred. Municipal abatement programs and utility costs may also lead to collection activity against you for post-petition costs and expenses. Additionally, if there is an injury on the property after your bankruptcy is filed, the injured party may be able to pursue you for collection.

These concerns are minimized if the mortgage creditor moves ahead quickly to get relief from stay and foreclose a property that is surrendered through a bankruptcy.  The mortgage creditors are often moving very slowly on these steps at the current time. You may want to speak with the mortgage creditor about completing a deed in lieu of foreclosure to reduce your risks and to finalize the surrender of property.

We are a debt relief agency.

We help people file for debt relief under the bankruptcy code.