Whether you filed bankruptcy prior to the new bankruptcy law changed in 2005 or after, this information is something that you need to know and check on. If you have a bankruptcy that has been discharged, and you kept your mortgage with the company that you had it with prior to filing, the mortgage company may no longer be reporting your payments as good credit to the credit bureaus.
The new laws state that when a bankruptcy is discharged, any existing creditors that you plan on still paying need to have a "reaffirmation" letter sent to them letting them know that you plan on continuing to make your payments. This includes any creditors that were not listed in a bankruptcy, including mortgage lenders.
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In a real-life case I am familiar with, this elderly couple had to file bankruptcy in 2005. They actually filed during the transition time of the new laws going into effect. They had a bankruptcy attorney who took care getting everything taken care of, or so they thought.
This past year, they went to their credit union to get a used car loan. They were surprised at how high their interest rate was, but figured it was just due to the bankruptcy from 4 years earlier.
Now one thing that is important to note here...is that this couple has never been late on a mortgage payment, and has been paying their mortgage faithfully for the life of the loan, even though the bankruptcy was 4 years ago.
It wasn't until they pulled their credit reports recently that they realized that even though the mortgage company was listed, it actually appeared as though the mortgage had been included in the bankruptcy. When I first heard of this, my first question was, "so if you have been making payments for the last 4 years, but they are showing it as being discharged, where are the payments going?"
I was confused and so were they until I learned about the reaffirmation that had to be sent. But here is the real kicker. The reaffirmation HAD been sent. The mortgage company claims they never received it. Yeah...right. Regardless, now they have been paying for 4 years with no improvement in their credit score because of this one problem.
So why do I share this information with you? Because it is VITAL to know and understand what is being reported, or NOT reported and why. And you also cannot assume that the people you pay or request to take care of what they are supposed to, will actually do their jobs.
It is up to us as consumers to learn and become educated about how credit works. We don't have to know all the laws. But we do need to know how to pull and read our credit reports from all 3 credit bureaus.
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