When you receive a discharge in a Chapter 7, all of your in personem debt is discharged, with few exceptions. When it comes to mortgages, a debt remains: debt on the house. What this means is that you personally are not obligated to pay for the house, but if you stop paying, the lender can collect from the house itself, via foreclosure. This is because the lender has a Deed of Trust, creating a lien on the home. However, payments, whether they are on time, late, missed or delinquent, should not be reported on your credit report. This can oftentimes create a stumbling block for rebuilding credit.
One solution the bank will suggest and that you might find online is to sign a reaffirmation agreement on a home. However, WE NEVER recommend that a client sign a reaffirmation without a compelling reason (i.e., significant reduction in principle/interest) and find that our Judges often do not permit the signing of a reaffirmation agreement. You can read more about reaffirmation agreements here.
So, what do you do?
- Request a payment history for the mortgage company. Your mortgage company is provided to supply this at least once each year pursuant to NCGS 45-94(d).
- File a dispute, in writing, with each of the three credit bureaus. You can read more on how to do this here.
- The credit bureau is required to verify the reported information with the mortgage lender within 30 days.
- At that point, the mortgage company can either:
- Do nothing, in which case the credit bureau must accept the information provided by the client OR
- Accurately report information. This can be difficult to explain how payments are made but not reported.
- Repeat this as often as needed.
- Always keep the payment history so it can be provided when applying for new credit (on a car, another house, a refinance, etc.)