Bankruptcy Gets Rid of Debts…Liens are a Different Story

A bankruptcy gets rid of debts but does not necessarily get rid of liens. Strangely, a person can file bankruptcy, and have no obligation to pay the mortgage on the house where they remain.  If they want to keep their home, however, they have to take care of the lien held by the mortgage company, and the mortgage company can foreclose on the home if the lien is not paid. The mortgage company cannot attempt to collect on the debt, but it can provide the owner notice of its lien rights. In the recently decided Fourth Circuit case of Lovegrove v. Ocwen, the court held that a generic notice sent to mortgage holders and bankruptcy filers did not violate the law when it said:

This communication is from a debt collector attempting to collect a debt; any information obtained will be used for that purpose. However, if the debt is in active bankruptcy or has been discharged through bankruptcy, this communication is not intended as and does not constitute an attempt to collect a debt.

Lovegrove also held that the creditor did not violate the Fair Credit Reporting Act when the customer asked it directly to remove credit information. The court determined that the request to modify negative credit information must come from the credit reporting agency

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