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Mortgage Payments Following Bankruptcy and Credit Reports

A debtor is not required to execute a Reaffirmation Agreement for a mortgage on real estate under New York bankruptcy law. This is advantageous, as it keeps you personally responsible for the mortgage obligation even after filing for bankruptcy and for any deficiency judgment that results from the foreclosure of the “reaffirmed” mortgage. Kingston, New York bankruptcy lawyer can help you with your legal issues.

Is there a drawback to not signing your mortgage’s reaffirmation agreement? The response may occasionally be “Yes,” depending on the mortgage holder’s policies.

Some mortgage lenders argue that because bankruptcy releases you from your personal responsibility for debts, they are no longer required to record your post-bankruptcy mortgage payments to credit reporting agencies (CRAs) because the underlying debt has been discharged. This could be a concern if someone checks your credit report for particular objectives, such as potential future mortgage refinancing efforts. Your refinance attempts could suffer if the credit report does not reflect your post-bankruptcy mortgage payment history.

Fortunately, there is a way out of this pickle, even though it requires two steps:

Step 1: By Section 2605(e) of the Real Estate Settlement Procedures Act (“RESPA”), send your mortgage servicer a Qualified Written Request requesting that they give you a breakdown of all mortgage payments you have made. This accounting should prove that you have been paying your mortgage on time after filing for bankruptcy.

Step 2: File a complaint about the reported mortgage payment information being erroneous with the CRA. Be sure to include the accounting you received in response to the Qualified Written Request. If you are indeed current with your mortgage payments, this must lead to the Credit Report entries being updated in accordance with The Fair Credit Reporting Act’s (15 USC 1681i) processes.

There is an alternative method, but it is labor-intensive and requires a lot of photocopying and record-keeping. It can also be used to repair erroneous Credit Report entries regarding your history of mortgage payments. When you file for bankruptcy, you should immediately start (1) making copies of all checks and bank drafts you use to pay your mortgage and (2) maintaining copies of your bank statements that indicate your mortgage lender or servicer has actually received and cleared the payments. You next register your complaint about the reported mortgage payment history with the CRA, claiming that it is wrong, and you include all check photocopies and bank statements that show you made and delivered the required payments to the lender. The Credit Report entries ought to be changed as a result.

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