There are a number of mistakes that debtors and their bankruptcy attorneys make that often cause problems after discharge or after their chapter 13 is confirmed. These mistakes often make it difficult to enforce the discharge or the automatic stay and can cause the debtor to suffer a serious financial loss.
4. Failing to Surrender Real Property for Value in Chapter 13.
So many times clients have come to us complaining that their mortgage lenders or servicers are still trying to collect the debt discharged in their Chapter 13. But was the mortgage claim discharged? This very complex issue commonly occurs when a debtor files chapter 13, includes the arrearage in his Chapter 13 Plan but then changes his mind or can’t keep up with the payments and the stay is lifted. The attorney will, of course, modify the plan to allow for the surrender but often forget to state that the property is being surrendered for value. In other words it must be clear in the modification order that the deficiency claim will be discharged along with all of the other unpaid debts when the plan is completed. Although few lenders would try to collect this deficiency debt after the discharge, they often will continue to report the debt to the credit bureaus and pull the debtor’s credit reports. Since it is unclear if the debt is discharged there is not much that can be done to stop this collection effort and this clear invasion of privacy. The bottom line is debtor’s credit score may suffer and their personal financial information will be exposed. Since mortgage lenders often share information with other lenders there is no telling who will end up seeing it.
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