How your credit report holds you back from filing for bankruptcy a new beginning

Your Bankruptcy Attorney may have persuaded you that filing for bankruptcy will provide you a financial fresh start. Unfortunately, this is just not the case for many people. Mortgage lenders, particularly large, well-known ones, are notorious for failing to properly update people’s tradelines on their credit reports. As a result, you will not only be denied a fresh start, but your credit score will also be artificially lowered.

Lenders like Wells Fargo prevent you from getting a financial fresh start after bankruptcy in the following ways:

  • The Due Balance Is Zeroed Out

After you file for bankruptcy, many mortgage lenders report a $0 amount on your mortgage. This is a major issue for you, because it deceives users of your credit report. Because timely payments account for 35% of your credit score, if you have a $0 balance reporting, there is no balance against which to credit your timely payments after you file for bankruptcy. Mortgage lenders, such as Wells Fargo and others, typically do not understand how to properly record their tradelines after a bankruptcy filing. Because you still owe money to your mortgage lender, zeroing out your balance is entirely inaccurate. Another issue with declaring no outstanding debt is when you apply for a new mortgage loan later. The prospective lender will want to know how you managed your previous mortgage. If your post-petition bankruptcy payments aren’t applied to your mortgage loan, you’ll need to show the new prospective lender that you kept up with your payments. This makes the already lengthy and unpleasant mortgage application procedure even longer.

  • Assigning the status of the account to “CLOSED”

Reporting the account as closed, like zeroing out your account balance, implies the lender will not give you credit for your post-petition bankruptcy payments. Again, timely payments account for 35 percent of your credit score. Every payment you make to your mortgage lender that isn’t applied to your balance is a payment that isn’t improving your credit score when it could. Your lender is burying its head in the sand by reporting your mortgage account as closed. Yes, you still owe this debt because it was not discharged by your bankruptcy.

  • Failure to report a due payment on a monthly basis

When someone files for Chapter 13 bankruptcy, they must create a repayment plan for their obligations. This sometimes entails making reduced payments to their secured creditors, such as their mortgage lenders, at lower interest rates. The payment plan becomes the new contract between the customer and the mortgage lender once the Bankruptcy Plan is confirmed by the court. The mortgage lender will frequently forget to update the payment amount and terms on the credit report, leaving the older and higher payment payable each month. This is incorrect, as that is not the monthly amount you due after your bankruptcy plan has been confirmed. You owe a much smaller sum. Your ability to get fresh financing will be hampered if you continue to disclose the older and higher balance.

  • After achieving your bankruptcy discharge, report the account as “included in bankruptcy.”

Your mortgage is no longer engaged in bankruptcy once your Chapter 13 Plan is completed and you receive a discharge. Your new payment plan, as specified in the plan, remains in effect, but the account is no longer considered bankrupt.

  • Delete your whole business line

When you file for bankruptcy, certain mortgage lenders and credit reporting agencies will simply erase your account. This will unnecessarily harm your credit. As previously indicated, timely payments account for 35% of your credit score. If you have made on-time mortgage payments, removing your tradeline and payment history can have a negative impact on your credit. While there is no requirement for a lender to report to a credit agency, they must do so accurately. By deleting your tradeline, you might argue that they are not reporting accurately because they report other consumers to the credit bureaus but not yours. So long as you’ve made on-time payments, requiring your lender to submit your credit history to the credit bureaus is well worth the effort.

If you are having trouble with any of these areas and your bank is not helping get them resolved, please send an email to

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