After bankruptcy (especially Chapter 7), your personal liability for a mortgage is typically discharged, meaning lenders usually stop reporting payments because they can’t pursue you for a deficiency, showing a $0 balance and “discharged” status instead; however, if you sign a reaffirmation agreement, you promise to keep paying, and the lender can (but may not) report your payments, but this is rare for purchase-money mortgages as it brings back personal liability you just shed. For those who keep paying without reaffirming, the payments won’t build credit, but you avoid deficiency judgments.
What Happens to Your Mortgage on Your Credit Report:
- If You Don’t Reaffirm:
- Your personal liability is wiped out.
- The lender reports the balance as $0 and notes the debt was discharged.
- Crucially, your subsequent on-time payments will generally NOT be reported, so they won’t help your credit score.
- The lender can still foreclose if you stop paying, but they can’t sue you for the remaining balance (deficiency).
- If You Reaffirm (Rare for Mortgages):
- You agree to remain personally responsible for the debt, just as if you never filed bankruptcy.
- The lender can then report your payments (positive or negative), allowing you to rebuild credit on that loan.
- Bankruptcy courts often question reaffirmations for mortgages where you’re current, as it offers little benefit to you.
Why Lenders Stop Reporting Payments:
- They believe reporting payments on a discharged debt violates the bankruptcy discharge injunction.
- It protects them from potential legal action for violating the automatic stay or discharge order if they report a balance or payments.
What to Do If You Want Credit for Payments:
- Talk to your lender: Ask them directly if they will report payments if you don’t reaffirm.
- Consider reaffirming: Only if you truly want the personal liability back and understand the full implications, as this is often not the best financial move. Reaffirmation needs to be completed before discharge, and it also requires the mortgage company to draft the reaffirmation agreement, which they almost never do.
- Manually create your credit history: Put together a spreadsheet, based on bank statements, showing timely payments.
- Build credit elsewhere: Focus on new, positive credit accounts (credit cards, car loans) after bankruptcy to rebuild your score, as those mortgage payments won’t count for credit if not reaffirmed.