Why Your Mortgage and Car Payments Are “Invisible” After Bankruptcy

You’ve received your discharge with your Chapter 7 bankruptcy. You’re making every car or mortgage payment on time each month, working hard to improve your credit after filing for bankruptcy. You’re waiting for your credit score to start climbing. Then you check your credit report and see… nothing.

No updates. No “Current” status. It’s like your car loan or mortgage doesn’t exist.

If your lawyer didn’t sign a Reaffirmation Agreement, and you didn’t represent yourself moving forward, you’ve likely entered the “Ghost Payment” zone. Here is what is actually happening with your unreported payments.

By Alexander Hernandez, J.D., Professor, and Author of Consumer Bankruptcy Law (Routledge).

Key Takeaways for Unreported Mortgage & Car Payments:

• The Reaffirmation Requirement: In many jurisdictions, if you don’t sign a Reaffirmation Agreement, the lender is not required to report your on-time payments to the credit bureaus.
• Payment vs. Credit: Making payments “voluntarily” allows you to keep the house or car (the collateral), but it does nothing to rebuild your credit score unless that agreement was filed and approved by the court.
• The Unreported Mortgage or Car Payment Fix: If you didn’t reaffirm the debt, your credit report will likely show “Discharged in Bankruptcy. You will need to take other steps to rebuild your credit.

The “Bank’s Excuse” is Hurting Your Credit Score

When you don’t reaffirm a debt, that debt is technically “discharged.” Even if you keep the car and keep paying, the “Ride and Drive” method, most lenders will stop reporting those payments to the credit bureaus.

Why? Because they are terrified of being sued for violating the “discharge” under the Fair Debt Collection Practices Act. They worry that sending you a statement or reporting your payment could be seen as an illegal attempt to collect a debt you no longer legally owe.

Well, at least that’s what the creditors argue. In reality, that’s just creditors trying to silently force debtors into signing reaffirmation agreements.

What is the “Ride-Through” Option and Why Does it Depend on Where You Live?

In the bankruptcy world, when a debtor doesn’t sign a reaffirmation agreement for a car loan, that is known as the “Ride-Through” option. Essentially, it means you keep your property and keep making payments without ever signing a reaffirmation agreement. Once the final payment is made, whether on a car loan or mortgage, the title transfers to you as it normally would.

While the ride-through option sounds like a great alternative, it’s not automatic. How this is handled varies per district. As I state consistently to my students, on Bankruptcy.blog, and even in my textbook Consumer Bankruptcy Law, “know your district.”

The Formal View of BAPCPA: Some courts, after the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) was passed, took the view that the “Ride-Through” option for cars was eliminated. In these districts, if you don’t reaffirm, the lender could repossess your vehicle, even if you are current on payments.

The Practical Reality: In many other districts, as long as you keep the insurance active and the checks arriving on time, lenders are happy to let you “ride through” because they would rather have your cash than a used car.

The Real-World Impact of Unreported Payments on Your Credit Score

Depending on your situation, signing or not signing a Reaffirmation Agreement has consequences, creating a frustrating Catch-22:

The Good News: If the Reaffirmation Agreement wasn’t signed, you aren’t liable for the debt if your situation changes. For example, if the car dies tomorrow or you can no longer afford the monthly payments, you can drop the keys at the dealership and walk away without owing a dime.

The Bad News: Without a signed Reaffirmation Agreement filed with the court, you are getting zero “credit” for those monthly payments. When you go buy your next car, the lender won’t see your history of reliability. The situation is made worse by a mortgage refinance, which shows years of no payments on your credit report.

Professor’s Note: While the mortgage lender could easily verify that your home is still in your possession, that you still reside there, and that the title never transferred, the reality is that without proof of payments and timely payments reflected in your credit report, the underwriting department will likely deny your loan.

Is it Worth Signing a Reaffirmation Agreement?

If you’re in this situation, don’t panic. You can still rebuild your credit, but it will take more time and effort. When my clients are facing this situation, we review the trade-off of credit reporting for financial safety.

For many of my clients, the safety of being able to walk away from substantial debt in case their financial situation changes is worth it when compared to trying to boost their ICO score. For example, their spouse might have strong credit.

Request a Payment History: Every year, ask your lender for a manual printout of your payments. This serves as documented proof of reliability for future lenders.

Focus on New Credit: If your car loan or mortgage lender isn’t helping, rebuild your credit with a secured credit card or a credit-builder loan.

Colleges and universities can purchase my bankruptcy law textbook directly from Routledge Publishing. Paralegals and students who are buying single copies can do so via Amazon Books. To access my YouTube channel, click this link.

You can learn more about filing for bankruptcy and the bankruptcy petition via this link. Information on the bankruptcy court system, contact information for trustees, and your state’s exemptions can be found here. The federal bankruptcy exemptions are listed here. The latest version of the 341 Meeting of the Creditors can be found here.

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