Discharged Bankruptcy – Why does my mortgage stop reporting after my bankruptcy was discharged?

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Your Credit Minute Show Notes:

00:00 Credit repair. So, this is your credit question of the day. So, let’s say someone has just filed a chapter seven bankruptcy. All of your debt has been discharged but you decided to keep your home. Okay? The mortgage hasn’t been discharged, okay, but it’s no longer appearing on your credit report. You’ve been paying your mortgage on time. You got to keep the house, um, but you want the positive credit on the report and you’re wondering you know, what gives? Why is it not there?
00:24 Well, here’s why. Okay, when you file a bankruptcy typically what you’re doing is you’re listing all of your assets as well as all of your liabilities. Liabilities being anything that you owe money on. Okay? And although the bankruptcy hasn’t been discharged, the mortgage companies will typically remove that record automatically from the credit report. Okay?
00:45 And the reason for that is, you remember that bankruptcy is a protection. It’s to protect you against creditors while you are going through a hardship, okay? So, if the mortgage company decides to report on the credit, it could be perceived as there’s trying to collect on a debt. That’s a major violation, a major violation of all the different bankruptcy laws that are out there.
01:03 So, by default, what will happen is the mortgage company zero’s out that record. Okay? They do this um, because it’s a liability. They don’t want to be perceived as a company that’s trying to solicit you for money and violate the bankruptcy court, um, so it’ll get removed.
01:19 Now, there is a way to get it back on, okay? And actually, there’s a caveat to this. Keep in mind that because it was listed as a liability, technically you could walk away from that house, okay? So, let’s say you wanted to walk away from the house, um, they can’t come after you for that mortgage. Okay? So, keep that in mind. Because it was listed as a liability you have that protection.


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