Bankruptcy Claims & Credit Reporting

March of 2005 we filed for bankruptcy.  We were at that time late on our mortgage.  They had started forclosure.  We sold the house to an investor with the deed stating an agreed sum of money between them and the mortgage holder.  Two years later, credit report shows “charged off account, bad debt, placed for collection: Skip”.  I talked to the mortgage lender and they stated that their records show a foreclosure.  How can that be when between the investor and the bank, they agreed on a selling price.  At no time since discharge of Jul 2005 have they tried to contact us for any additional money or any other correspondence.  What can I do?

Donald

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Hello Donald,

The mortgage lender should be reporting the account with an account status code as of the date the bankruptcy case number was assigned.  The notations you’ve cited of “charged off account, bad debt, placed for collection: Skip” would not meet the requirements of the FCRA if that was not the condition of the account pre-petition.  After discharge the account should be listed as “included in bankruptcy” with no balance owed.  

In addition to the FCRA requirements, we’ve written about a creditor’s violation of the discharge injunction before in Bankruptcy, Mortgage & Foreclosure.  There has since been new development in this case law.  A more recent case in re Mahoney [2007 WL 1217851, Bankr. W.D. Tex. Apr. 23, 2007] states:

“There must be evidence of an effective connection between the conduct of the creditor and the collection of the debt.  The mere fact that the creditor committed an act is insufficient as Vogt and Irby have shown.  What is needed is some evidence that the act is one to effectively collect a discharged debt…Reporting a debt to a credit reporting agency – without any evidence of harassment, coercion or some other linkage to show that the act is one likely to be effective as a debt collection device – fails to qualify on its own as an “act” that violates 524.”

In conclusion, file a CMRRR dispute with the CRA advising of the inaccurate reporting and cc the mortgage lender with a CMRRR dispute.  If your report is not corrected so as to be “complete and accurate” then you have FCRA violations, which are actionable.  Bankruptcy claims, on the other hand, don’t appear to have as much to do with credit reporting as we had previously thought.

Thanks for the questions and hope this helps.

Paul

This author is not an attorney and this information should not be considered legal advice.  Please consult an attorney for legal advice.