Home forclosure on disharged mortgage

[puravida]

What is the name of your state? Colorado

My bankruptcy disharged in October 2005 (old law). My mortgage was discharged. I still made the payments even though the debt was forgiven. My question is, since I am not required to make payments, can my credit be negatively impacted if I let the mortgage company forclose on my house? Id just sell my house, but it has lost so much value since I bought it that it would cost 5,000 to sell it.
bob

[BoredAtty]

Originally Posted by puravida

What is the name of your state? Colorado

My bankruptcy disharged in October 2005 (old law). My mortgage was discharged. I still made the payments even though the debt was forgiven. My question is, since I am not required to make payments, can my credit be negatively impacted if I let the mortgage company forclose on my house? Id just sell my house, but it has lost so much value since I bought it that it would cost 5,000 to sell it.
bob

Your post is contradictory. If you are not required to make mortgage payments, then clearly the mortgage company cannot foreclose. After all, foreclosure is a result of not making required mortgage payments.

Accordingly, what you state is not possible. Your mortgage was not discharged because it is a secured loan -- instead the collateral would have been sold to pay off the loan.

In short, you must continue to make mortgage payments or risk foreclosure, which will negatively affect your credit.

[puravida]

Originally Posted by BoredAtty

Your post is contradictory. If you are not required to make mortgage payments, then clearly the mortgage company cannot foreclose. After all, foreclosure is a result of not making required mortgage payments.

Accordingly, what you state is not possible. Your mortgage was not discharged because it is a secured loan -- instead the collateral would have been sold to pay off the loan.

In short, you must continue to make mortgage payments or risk foreclosure, which will negatively affect your credit.

Thanks for the help. I guess I am confused. I had my credit report pulled a month ago and there was no mention of my last two years of mortgage payments. When I called the mortgage company, they told me they didnt report my payments because I included my mortgage in the bankruptcy. They told me that since I wasnt required to repay them anymore, they wouldnt report my payments.

Then, I went to a realtor to discuss buying a new home. He pulled my credit and immediately qualified me for a large amount because my current mortgage didnt show on the credit report. He is calling me now wanting me to buy a house.

It doesnt seem right that the mortgage company can refuse to report my positive payments, yet report a negative forclosure.

Does anyone know how bad a forclosure effects your credit? Can I buy a new house and let the current one get forclosed on?

Thanks for your help

[bigun]

I'm assuming you didn't reaffirm your mortgage?

[Gregeney]

Some things need to be cleared up here. It is apparent that the mortgage was not reaffirmed and was indeed discharged. That's why it is not showing up on the credit report. This is what is called a "ride through". Although the debt is legally discharged, the debtor continues to make payments and the creditor accepts them just like they did pre-petition.

If you stop making payments to the mortgage company they will need to file a foreclosure to take control of the property. Even though you don't owe them any debt, it may be possible that the foreclosure would still show up on your credit report. Unfortunately, I'm not sure about the mechanics of the credit reporting agencies.

If you are decided upon giving up the property, it might make better sense to offer the mortgage company a deed in lieu.

[seniorjudge]

A deed in lieu of foreclosure means that you will deed the land back to the lender instead of making them foreclose on it.

It saves both parties a lot of time and trouble.

[puravida]

Originally Posted by seniorjudge

A deed in lieu of foreclosure means that you will deed the land back to the lender instead of making them foreclose on it.

It saves both parties a lot of time and trouble.

That sounds great. Does that negatively effect your credit. If so , how much? Should I pay an attorney to handle that for me or can I do a 'deed in lieu' directly with the mortgage company?

Oh and to the other question, you are correct, I didnt reaffirm my mortgage.

Thanks

[moburkes]

Originally Posted by puravida

That sounds great. Does that negatively effect your credit. If so , how much? Should I pay an attorney to handle that for me or can I do a 'deed in lieu' directly with the mortgage company?

Oh and to the other question, you are correct, I didnt reaffirm my mortgage.

Thanks

You can contact the mortgage company yourself, unless you used a lawyer for the BK. In that case, they will only speak to your lawyer.

[puravida]

from [url]http://www.bankruptcylawnetwork.com/2007/04/18/my-bankruptcy-is-over-and-my-mortgage-company-stopped-reporting-my-payments-to-the-credit-bureaus/[/url]

Once you receive your bankruptcy discharge, your creditors are forbidden to attempt to collect any of your debts except the ones that survive your bankruptcy. If you did not sign a reaffirmation agreement with your mortgage company, your home loan was discharged along with your other debts. If your mortgage company reports that you owe a balance after your bankruptcy discharge, the lender would be in violation of the bankruptcy discharge order and the Fair Credit Reporting Act.

So I take it the fair credit reporting act doesnt stop them from reporting any kind of forclosure, just positive payment history.....that doesnt seem right!

Thanks again to all who have replied. Im going to look up the deed/lieu thing.

[puravida]

One final question. I make 60k a year. My middle credit score is about 670. My bankruptcy is 2 years old in October. My goal is to buy a 200-250k house. If you were me would you:

a. Sell my current house at a 3-5k loss and get whatever interest rate I can get 2 years past bankruptcy. The loss would mostly be the 'buyers fees' and to cover it Id have to borrow against my pension.

b. do a 'deed in lieu of forclosure' and pay what may be a higher rate (if I could get a mortgage at all)

c. too many variables, go pay a lawyer.

THANKS!!!!

[Ladynred]

A foreclosure showing against a discharged debt would be a violation of your discharge injunction, since a foreclosure is, technically, a collection action. There can be no collection on a discharged debt. If a foreclosure shows up on your reports, then you dispute it as 'included in bankruptcy, discharged'. The mortgage SHOULD still be reported as 'included in bankruptcy', even though you've been making payments, it's still, legally, a discharged debt.

[justalayman]

Originally Posted by puravida

What is the name of your state? Colorado

My bankruptcy disharged in October 2005 (old law). My mortgage was discharged. I still made the payments even though the debt was forgiven. My question is, since I am not required to make payments, can my credit be negatively impacted if I let the mortgage company forclose on my house? Id just sell my house, but it has lost so much value since I bought it that it would cost 5,000 to sell it.
bob

I think you need to go back to your discharge paperwork and find out what actually happened. I'm with BA on this one. I cannot see how you were released from the debt yet allowed to keep the house.

If the debt was forgiven, they cannot foreclose on the house and whatever you sell it for is yours, there is no debt with any mortgage company (at least with how you make the situation out to be).

There is no need to consider a deed in lieu of foreclosure since you do not owe the bank anything. The house should be yours free and clear, at least as you post the info.

I just don;t see it as actually being this way. I believe you must have reaffirmed the debt at some point and simply not realize it.

[BoredAtty]

Originally Posted by Gregeney

Some things need to be cleared up here. It is apparent that the mortgage was not reaffirmed and was indeed discharged. That's why it is not showing up on the credit report. This is what is called a "ride through". Although the debt is legally discharged, the debtor continues to make payments and the creditor accepts them just like they did pre-petition.

If you stop making payments to the mortgage company they will need to file a foreclosure to take control of the property. Even though you don't owe them any debt, it may be possible that the foreclosure would still show up on your credit report. Unfortunately, I'm not sure about the mechanics of the credit reporting agencies.

If you are decided upon giving up the property, it might make better sense to offer the mortgage company a deed in lieu.

I take back part of my previous post. You're right...it must have been a ride-through.

[justalayman]

Originally Posted by BoredAtty

I take back part of my previous post. You're right...it must have been a ride-through.

then the debt was not discharged as the OP posts.

[Ladynred]

I cannot see how you were released from the debt yet allowed to keep the house.
then the debt was not discharged as the OP posts.

Yes, the debt WAS discharged. If there is no reaffirmation, the mortgage debt gets discharged and the debtor is relieved of all LIABILITY for that debt. However, since it IS a secured debt, you cannot keep the property w/o continuing to make payments. As long as you keep up the payments, the creditor is happy and has NO grounds to forclose - you get to keep the house. That's the way it has always been with any secured debt.

Should the debtor decide to walk away from the property or give back the car, then the creditor CAN NOT collect a single penny on the loan - because it was NOT reaffirmed and therefore discharged. The creditor is left with it's security interest - the house or car - to dispose of as usual - foreclosure sale or auto auction.