Trying to Refinance a Home Loan After Bankruptcy

Some time ago you filed a bankruptcy and received a discharge.  You owned a home at the time your bankruptcy was filed and have continued paying on the mortgage.  Now you are trying to a refinance of your mortgage but are told that “because you did not reaffirm your mortgage during the bankruptcy your credit report does not show any payments”.   There are two issues going on here.
First, by filing for bankruptcy your obligation to pay most debts, such as your mortgage, was discharged (meaning that the creditor cannot force you to pay the debt).  Of course, if you want to keep your home you need to pay the mortgage.  The mortgage lender will probably report your mortgage as “discharged in bankruptcy”.  The mortgage lender may also choose not to report any payments make after your bankruptcy was filed.  You ask your mortgage lender to report your post-bankruptcy payments, but they refuse because the “debt was discharged in bankruptcy”.   They are correct, the debt was discharged in bankruptcy and The Fair Credit Reporting Act (FCRA) does not require creditors to report to the credit reporting agencies.   Therefore, the mortgage lender is not required to report that you are still making payments.
Second, you want to refinance your mortgage.  Your credit report does not reflect any payments made since the filing of the bankruptcy so your credit score is not increasing as quickly as you like.  Logically you should be able to go to your current lender and refinance with them; after all they know you have been making payments.  Right?  Most likely they will tell you they cannot refinance because you did not sign a reaffirmation agreement during your bankruptcy.  That reaffirmation agreement is a new contract and would bind you to the same terms that existed before filing your bankruptcy.   The person at the mortgage company is telling you that “your attorney screwed up by not having you sign a reaffirmation agreements”.   This is not accurate for many reasons – 1) the lender did not prepare a reaffirmation agreement, 2)  your attorney was looking out for you because the law of the state where you live makes you personally responsibility for the reaffirmed mortgage debt, or 3) the bankruptcy judge will not sign a reaffirmation agreement on residential property.*
I am not ignoring the importance of a good credit rating, especially after bankruptcy.  If you continue making payments on your home or vehicle you should get the benefit of those timely payments reflected in your credit reports.  Here is where you have to do the work yourself.  First, keep excellent records that prove you made all your mortgage payments on time.  Have copies of the payments, along with the date that the payment was negotiated by the lender.  Second, you should ask the creditor for proof of payments – pursuant to the federal Truth in Lending Act the creditor is required to provide that proof.  Armed with that proof file a dispute with the credit reporting agency stating that all payments are made timely.  You may be able to attach proof of those payments, but need to check with each credit reporting agency to find out the process.   Look at the web site for the Federal Trade Commission for additional information.
Lastly, you can go to another lender to refinance your home.  Just plan ahead and have the prior proof of payments ready for a potential new lender.  I know this is a challenge, but remember there was a reason you filed for bankruptcy.  Take solace in the relief you already received from a well-planned bankruptcy and start to plan for your future.

*I could spend an entire post just explaining each of the three reasons, but choose to focus on one topic in this post.

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