One key thing to know about rebuilding your credit, is that information about your post-bankruptcy payment history makes up 35% of your credit score. Therefore, it is only natural to think that timely mortgage payments going forward will help you raise your scores after bankruptcy. Unfortunately, that is not the case.
Why Don't They Report the Payments?
Mortgage companies do not report payment histories because, although the mortgage lien remains in place, and the bank will foreclose if you do not make the payments, your personal responsibility to pay the mortgage was discharged in the bankruptcy.
They are fearful that any reporting on payment history implies that you still owe the debt, when you do not. The only exception to this is if you were to reaffirm the mortgage as part of your bankruptcy. This removes the debt from the bankruptcy discharge, and it is not something I recommend to my clients, especially if they owe more than their home is worth.
Reaffirming the Mortgage is Not the Answer!
Many banks tell people to have their lawyer reopen their bankruptcy to reaffirm the debt to fix it, but the downside of this far outweighs the possible advantage to rehabilitating your credit score. There are other ways to do this, including your payment history on a reaffirmed car loan, car lease, or secured credit card.
So What Do I Do?
If you live in southern New Jersey and are considering filing bankruptcy, please feel free to call me at 856-432-4113 or contact me through this site for a free consultation in my Woodbury office to discuss your case.
If you are looking for more information about bankruptcy, then download my free book,Top Questions People Ask About Filing Bankruptcy in New Jersey.
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