Credit Ratings During Chapter 13 Plan

People file Chapter 13 bankruptcy in Florida most often to stop foreclosure of their home. The debtors file a Chapter 13 plan including normal monthly mortgage payments and a small part of the arrearage each month. Some clients complain that even though they are current in their payments to the Trustee under the Chapter 13 plan their mortgage company still reports to the credit bureau that the debtors are 120 days or more behind on their payments. Clients don’t understand why their credit continues to be adversely affected even though they are paying what they are supposed to pay.

I think that these mortgage companies are not doing anything illegal. My understanding is that mortgage companies are not required to report to credit bureaus that the account is current until the bankruptcy court issues a discharge order declaring the mortgage debt to be current. However, this is not an issue of bankruptcy law and is instead a question of banking laws and fair credit reporting.

posted by Jonathan Alper, asset protection and bankruptcy lawyer, Orlando, Florida