Bankruptcy and Home Mortgage - Westgate Law

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Bankruptcy and Home Mortgage

Many of the clients we consult have early questions regarding bankruptcy and home mortgage.

When filing for Chapter 7 bankruptcy, consumers have the option to reaffirm their mortgage. If filers are current on their loan payments and will be able to meet future payments, reaffirming the loan simply informs the lender of their intent to continue paying toward the debt regardless of the bankruptcy in process. Reaffirmed mortgages (or other secured debt) allow bankruptcy filers to keep their property during bankruptcy. As long as bankruptcy filers who reaffirm their mortgage abide by the terms of the reaffirmation agreement and make the necessary payments, future payments are recorded on the filer’s credit report.

If you reaffirm your loan, but the lender then refuses to report your payments and/or they show the loan as closed, etc., there is legal action you can take.

In this instance, you would need to file a Fair Credit Reporting Act or FCRA lawsuit and a claim inside the bankruptcy against the lender refusing to report your payments and accurate account detail according to the terms of the reaffirmation agreement. You have rights and there are laws in place to protect them. Making a good faith effort to work with the lender to resolve the situation is the first step and to take effective legal action, you would need to be able to prove that you have done so.

Once you make a good faith effort to resolve the issue directly with the lender look for an attorney that take FCRA cases. Most lawyers working on FCRA cases do not charge the client up front. They take the case on a contingency basis – only receiving payment if they are successful. Once you’ve made a good faith effort to discuss the issue with the lender and haven’t been able to come to a solution, it’s time to take legal action. Continuing to tackle this type of problem civilly after repeated failed attempts is a waste of time. If the creditor has been provided with the appropriate documentation, reasonable requests to rectify issues that are not in accordance with the reaffirmation agreement, and plenty of time to take care of the problem, turn to your legal options for resolution in the matter.

You will most likely need to provide your FCRA attorney with proof of your “good faith” efforts to resolve the situation directly with the lender. It’s best to have a clear paper trail: names, departments, fax confirmation sheets, etc. The more extensive the paper trail, the stronger your case is and the more likely you’ll like the eventual resolution. The ultimate goal of this type of suit is to have your payments appropriately report to the credit bureaus, but you might also be entitled to damages. Discuss this possibility further with your FCRA attorney. If you’re lucky, you might be able to find an attorney who handles the FCRA issue simultaneously with the bankruptcy court issue since the process is very similar in both types of case.

For additional information regarding bankruptcy and issues that come up related to filing for bankruptcy in California, get in touch with the Southern California bankruptcy lawyers at Westgate Law.

About the Author

Justin Harelik

Justin has a singular goal: to get people out of financial distress and move them to financial stability and prosperity. He does this by combining 15 years of in-depth experience in bankruptcy, credit management, debt negotiation and student loan modifications, and he does it with both English and Spanish-speaking clients.

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