Deed in Lieu after Chapter 7 Bankruptcy

Anonymous · ‎05-16-2012

My BK7 was discharged in Jan 2011, and my mortgage was not reaffirmed. Since then I've been able to get my FICO back up to the 690's.

I decided in Oct 2011 to no longer continue to make the payments on my upside down mortgage, BOA has not reported any negative marks on my credit since the debt was discharged and not reaffirmed.

I'm considering accepting a Deed in Lieu of Foreclosure offer from BOA, and I'm curious of how this will affect my credit. BOA has stated that they will report as "settled", and that would supposedly come off after 3 years. Are they even allowed to report that, being that "settled" is a negative remark? Does anyone know how a Deed in Lieu would affect credit after a CH7 BK?

pizzadude · ‎05-16-2012

@Anonymous wrote:
My BK7 was discharged in Jan 2011, and my mortgage was not reaffirmed. Since then I've been able to get my FICO back up to the 690's.

I decided in Oct 2011 to no longer continue to make the payments on my upside down mortgage, BOA has not reported any negative marks on my credit since the debt was discharged and not reaffirmed.

I'm considering accepting a Deed in Lieu of Foreclosure offer from BOA, and I'm curious of how this will affect my credit. BOA has stated that they will report as "settled", and that would supposedly come off after 3 years. Are they even allowed to report that, being that "settled" is a negative remark? Does anyone know how a Deed in Lieu would affect credit after a CH7 BK?

You have a FICO score of 690 with a BK reporting that's barely over a year old ? Did you pull this score from myFICO ?

Did BOA state that they would remove the negative reporting of the Deed in Lieu after 3 years ?? If not then it will be a negative remark on your reports for 7 years.

It will definately hurt your FICO score, probably along the lines of a foreclosure.

March2010 FICO® ~ 695 TU, 653 EQ, 697 EX

Anonymous · ‎05-16-2012

Yes, I pulled it from myFICO, it's the Equifax score. My situation may be a little different. I was current on alomst everything before I filed, my score was over 700 when I filed. I've have some credit cards that I use and pay off each month, including one that I've had for 18 years that did not close on me. I'm pretty sure these factors contribute to the 690 only 1 year and 4 months out.

So my question is really this, can BOA legally make another negative remark on my account since it has already been discharged? The negative mark being "Deed in Lieu" or "Paid Settlement". I would think not, just like they cannot make any remarks about my recent lack of payments.

pizzadude · ‎05-16-2012

So your mortgage was included in the BK, but BOA never took the house back ? Did they note the Mortagage on your Credit Reports as having been included in BK ? You kept paying for 8 or so months after you filed, is that correct ?

March2010 FICO® ~ 695 TU, 653 EQ, 697 EX

Anonymous · ‎05-16-2012

Correct, the mortgage was included in the BK7 and discharged. It is currently reported as dischared in BK, with $0 balance, but not closed. I continued to pay for a while to aviod a foreclosure because I was not sure if I was going to move. Once I decided that I needed to move, I stopped making payments (Oct 2011).

So now, if I accept THEIR offer for a Deed in Lieu, are they allowed to post the negative remark of "DIL" or "Settled" on my credit? My understanding is that once the debt is discharged the creditor can no longer make negative remarks on your credit.

Anonymous · ‎11-21-2013

I'm in the exact same posiiton. Anybody know?

ezdriver · ‎11-21-2013

The liability for loan repayment was discharged in the ch 7 bankruptcy so nothing related to payments on that loan will be reported. However, a foreclosure/deed in lieu is not an item covered in the bankruptcy. For this reason, the lender will undoubtedly report that event to the credit bureaus when it occurs.

StartingOver10 · ‎11-27-2013

No, the lender can not update their reporting from IIB and zero balance on the mortgage post discharge. If they changed the reporting after your successful discharge to anything other than the iib notation, that would be a violation of the discharge injunction. Ask your BK attorney to send a letter to the lender if they change how it is reported.

As to having the f/c or deed in lieu subsequent to your BK, that is pretty much SOP if you didn't have the f/c or DIL prior to filing. As EZ points out above your personal liability to repay the mortgage was discharged in the BK, but the lien remains on the property. In order to 'complete' the process of getting the collateral (your property) the lender then has to go through either a DIL or f/c or even a short sale. When you complete the DIL the notation still shows as iib on your credit report; however, in your county's property tax records a recorded deed will go from you back to the bank (DIL). This is an important document for you because the 'clock starts' as of the date of transfer of the property back to the bank (or to another person in the case of a short sale). If you decide to get a new mortgage someday, you will want to keep a record of the transfer for a future mortgage as the underwriter on the new loan will want to see the recorded transfer date.

Anonymous · ‎03-20-2014

Ok, so I have a similar situation. I filed in 2010 but stayed in the house initially. I just moved out in December 2012 and stopped paying and then BOA sold my loan to Seterus. Seterus wants to do a deed in lieu. Will that better or should I let them foreclose since the debt was discharged in the Chapter 7? I would like the process to go smooth and quick to get my name off of that deed, but don't want to do anything that reaffirm any portion of the debt or cause me any further negative financial consequences. What are your thoughts?

ezdriver · ‎03-20-2014

@Anonymous wrote:
Ok, so I have a similar situation. I filed in 2010 but stayed in the house initially. I just moved out in December 2012 and stopped paying and then BOA sold my loan to Seterus. Seterus wants to do a deed in lieu. Will that better or should I let them foreclose since the debt was discharged in the Chapter 7? I would like the process to go smooth and quick to get my name off of that deed, but don't want to do anything that reaffirm any portion of the debt or cause me any further negative financial consequences. What are your thoughts?

If the debt was discharged, how could any reaffirmation of a discharged debt happen. It cannot. Use the opportunity to get your name off the deed and move on with your life. Have you not read about many who would love to get their names of the deed for their houses and cannot because the lenders are dragging their "feet" with forclosing? Take the offer and run.