Mortgage ride-thru - Can they still pull your credit?

[DieTryon]

Have a discharged chapter 7 and did not reaffirm mortgage. I am 37 days past due. I pulled a copy of my credit report yesterday and saw they pulled my credit file. If the debt was discharged can they still do this? Also they started calling today? I plan to become current again in about a week. But I am wondering since the debt was discharged can they still call and pull my credit report?

[Methuss]

Nope. It is not permissible for them to continue "business as usual" on a discharged debt. They must report the balance as $0 and included in bankruptcy even if you rode through on the security interest. This is because with the discharge in place you no longer have any legal obligation to pay them anything. You can pay them voluntarily if you want, but you are not obliged to do so.

In light of that, the phone calls are a violation of the permanent injunction against imposing personal liability for the debt....and you can bring an action of contempt against the lender for each occurance. Start keeping a log of the calls with date/time/who called. And if you have a memo function on your answering machine catch one or two of them in a recording violating the injunction. Just say something like "hrm, what time is it?" and let them answer followed by "and today is {date}" so it's all recorded. Get five or six of them documented and/or recorded and then take it to your bankruptcy attorney to file a motion to show cause against them.

One more thing. Tread very lightly on your mortgage now. Get caught up and NEVER fall behind again. Since your personal liability has been discharged, they do not have to wait to accelerate the mortgage and foreclose. They can do so as soon as your grace period (if any) has expired...and that is usually only 15 days after the due date of the payment. With the foreclosure issues in the country right now that may not be likely, but it can happen.

[DieTryon]

Thanks for the info on the inquiry and phone calls. I was finally able to get through to my attorney yesterday and he confirmed what you stated also.

Only other thing is he seemed to believe that the Mortgage lender still has to follow my states foreclosure laws in other to foreclose. Which allow 90 days before a notice of default.

Like I said previously this should not be an issue because I will have the payment in soon.

[Methuss]

That is ture. To put it in perspective, the bankruptcy eliminates your personal liability, but the lien on the property remains.

Each state is different. Arizona, for example, allows non-judicial reposession of real estate. In a nutshell that means if you are late, they just file the paperwork at the land records office and send the sheriff to evict you. No judge involved at all. Other states have a process in place that requires the lender to allow you to reinstate the mortgage. Illinois is a good example, but there they place limits on it. You can only do one re-instatement in a 5 year period in Illinois.

Since it is unreasonable to assume anyone knows every law in every State, I err on the side of caution and simply say don't be late anymore. Besides, if you rely on that safety-net it could fall out from under you.

A better safety is to start putting some money out of each paycheck into a savings account religiously until you have 3 to 6 months of basic living expenses saved. That should be your safety net.