MORTGAGE LITIGATION AFTER BANKRUPTCY - FCRA, TCPA & DISCHARGE VIOLATIONS

A common problem for consumers who have surrendered their homes or rental property in bankruptcy is that their lenders or mortgage servicers often ignore the bankruptcy discharge and attempt to collect the mortgage deficiency. This illegal collection activity may take the form of statements, collection letters, notices of forced insurance placement, escrow reconciliations, modification offers, etc. The correspondence will say that it is for informational purposes only and to disregard it if the consumer has been through bankruptcy, but the statements usually demand the payment of money and provide an envelope to remit payment. Of course, these lenders and services hope the consumer will write a check and send it in even though they have no obligation to do so.

A worse problem is when the lender or mortgage servicer fails to update a consumer’s credit report to show that the debt has been discharged in bankruptcy. This results in the consumer not only suffering from the effects of the bankruptcy on his credit but also a delinquent mortgage. When a potential lender pulls the consumer’s credit report it will appear that the mortgage has been reaffirmed, is past due, that the full balance is still owed. This could result in a consumer being denied credit in the future or, if credit is granted, having to pay a higher interest rate, and certainly will preclude getting new mortgage financing.

For some reason mortgage lenders and servicers have a difficult time shutting down their collection efforts even after they are told by the consumer or their attorneys to cease and desist. If this happens litigation may be necessary to enforce a consumer's rights provided by the bankruptcy discharge, the Fair Credit Reporting Act (FCRA), the Telephone Consumer Protection Act (TCPA) or other state and federal statutes.

Consumers who experience continued collection activity by lenders should keep all correspondence and emails and keep a log of all phone calls as these may be needed as evidence should litigation be necessary. It is also advisable to periodically review their credit reports to be sure the mortgage debt is being correctly reported.

If your mortgage lender, servicer or their collection agent is harassing you or the loan is still showing up on your credit report, give us a call for a free consultation.