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socrateaser
socrateaser, Attorney
Category: Bankruptcy Law
Satisfied Customers: 33548
Experience:  Attorney and Real Estate Broker -- Retired (mostly)
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If you file bankruptcy and dont include a mortgage on a rental

Resolved Question:

If you file bankruptcy and don't include a mortgage on a rental property. When attempts to modify it fail because it's rental property and it forecloses while you're still in bankruptcy, how will it appear on the credit report.
Submitted: 9 months ago.
Category: Bankruptcy Law
Expert:  dylatess replied 9 months ago.
Over 35 years, I have assisted my clients with debt problems having filed more than 32000 Chapter 7 and Chapter 13 Bankruptcy petitions.

If the mortgage company was aware of the BK, they cannot foreclose while you are in BK unless they obtained permission from the court. Otherwise, they have to wait until the BK is completed.
Regardless, once the foreclosure is completed, it will be reported to on your credit as "not paid, foreclosed." It will also show in the public record section as a foreclosure.

Please rate my answer ok or better so that I am paid for helping you.
Customer: replied 9 months ago.

Do they put the foreclosure status on the credit report while you're still in bankruptcy or after bankruptcy is discharged?

Expert:  dylatess replied 9 months ago.
After the discharge is entered.
Please rate my answer ok or better so that I am paid for helping you.
Customer: replied 9 months ago.

They put on my report after the foreclosure, foreclosure redeemed, which it wasn't. If I dispute it, will they just update it with a foreclosure status, or just remove it until the discharge?

Expert:  socrateaser replied 9 months ago.
Hello,

Different contributor here. The original contributor has decided to exit the conversation. Please permit me to assist. You asked:

They put on my report after the foreclosure, foreclosure redeemed, which it wasn't. If I dispute it, will they just update it with a foreclosure status, or just remove it until the discharge?


A: The lender or loan servicer is required by federal law to provide accurate information. If you dispute the entry, the record will be corrected immediately.

However, a "foreclosure redeemed" is a better status than a straight foreclosure, because it indicates to other lenders that you paid off the lender and recovered the property. In my opinion, it would be a big mistake to dispute the status, because the result will be that your credit score will fall from its current level.

Please let me know if my answer is helpful, or if I can provide further clarification or assistance.

And, thanks for using justanswer.com!
Customer: replied 9 months ago.

So, if I dispute it, they will update it during the bankruptcy and not wait until the discharge?

Expert:  socrateaser replied 9 months ago.
Several bankruptcy courts have held that a credit report entry made while the automatic bankruptcy stay is in force, does not violate the stay. Only an entry that demonstrates an attempt to coerce the debtor to pay the debt will violate the stay. There is very little appellate case law on this issue, so it's always possible that a loan servicer might decide not to update the credit report, especially, if its legal counsel believes that the change could be viewed as an attempt to coerce payment by the debtor.

However, the general consensus is that there is no legal impediment to making a credit report entry during a debtor's bankrutpcy.

Hope this helps.
Customer: replied 9 months ago.

Thank you.

Expert:  socrateaser replied 9 months ago.
You're welcome anytime!
socrateaser, Attorney
Category: Bankruptcy Law
Satisfied Customers: 33548
Experience: Attorney and Real Estate Broker -- Retired (mostly)
socrateaser and other Bankruptcy Law Specialists are ready to help you

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