Legal Question in Credit and Debt Law in Michigan
Federal plus student loans/bankruptcy
Last year I filed chapter 7, now the banks are turning down my daughters Federal Plus Loans. But law says they cannot discriminate against anyone filing Chapter 7. The mortgage companies are listing foreclosure and not as a Chapter 7, so the bank said this is why they cannot process the loan. Should they be listing the foreclosure as Chapter 7 instead? All my other credit says paid on time.
2 Answers from Attorneys
Re: Federal plus student loans/bankruptcy
A foreclosure is not a bankruptcy. Although they often occur at the same time, a bankruptcy often occurs as a result of the foreclosure. The mortgage deficiency is discharged, but the status of the foreclosure does not change. Being turned down for a loan because of a bankruptcy is not discrimination, it is a factor in your credit worthiness. Being turned down for a job may be discrimination.
Re: Federal plus student loans/bankruptcy
If the bank is telling you that the reason they cannot process the loan is because the mortgage company is listing the debt as foreclosure versus Chapter 7, then you need to dispute this on your credit report and list an explanation. Then send a letter to your mortgage company telling them to accurately reflect the credit history by indicating Chapter 7 versus foreclosure as required by the Fair Credit Reporting Act. A letter from an attorney goes a long way. If you would like me to prepare one for you at a very reasonable rate, please contact me at [email protected], or visit my website at www.lawrefs.com.
(Please do not rely on this communication which does not create an attorney-client relationship and which is intended merely as a discussion of legal principles and is not to be relied upon.)
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