20 Aug Wisconsin Bankruptcy Court – Creditor Must Update Credit Report For Chapter 13 Consumer
Does a creditor receiving payments in a Chapter 13 bankruptcy have to update the consumer’s credit report to show that the balance on the loan is being paid off? In a recent Wisconsin bankruptcy ruling, the court came out on the side of the consumer.
In the case of In re Luedtke, the debtor had filed a Chapter 13 bankruptcy case showing a automobile loan from the University of Wisconsin – Oshkosh Credit Union. Though the debtor was paying the claim through her Chapter 13 Plan, the post-petition payments were not being credited on her credit report.
Mrs. Luedtke tried to refinance her mortgage so she could pay off her Chapter 13 Plan, and claimed she was unable to complete the refinancing due in large part to the incorrect information on her credit report. Although she requested correction of the report to the credit union, her request was denied. She did not, however, report the allegedly inaccurate information to the CRAs.
So Mrs. Luedtke went to court, claiming that the Credit Union must report the loan as modified by her Chapter 13 plan and should report as current payments the Debtor makes on the loan under her plan.
This is a rare sort of case because most decisions hinge on whether reporting a balance due after a bankruptcy – not during an active one – is a violation of the U.S. Bankruptcy Code. And though the argument makes sense, it’s not one that many lawyers have made. After all, most consumer are concerned about their credit report after bankruptcy.
The bankruptcy court looked to a number of cases involving violations of the discharge order – including a few of my cases on the subject – and found that the Credit Union did violate the confirmation order by its affirmative reports to credit reporting agencies.
Just as a creditor can violate the discharge injunction for deliberately refusing to submit accurate information, the confirmation order prevents those same actions during the course of the Chapter 13 case. See McKenzie-Gilyard., 2008 U.S. Dist. LEXIS 50262. When the Credit Union reports that the Debtor owes amounts according to the original loan, those reports are not accurate, and violate the confirmation order.
There is a take-away to this case, and a practice tip for all lawyers who handle Chapter 13 bankruptcies. As the court states:
Moreover, the Credit Union correctly notes that neither the plan nor the order confirming the plan expressly requires the creditors to report plan payments to CRAs. In a plan which depends on a balloon payment at the end in order to satisfy the claims, such a provision would be wise. On the other hand, the confirmation order should not have to tell a creditor whose claim has been reduced or payment stream altered to report the correct amount and payment history to the CRAs; the creditor is bound by the confirmed plan to the new provisions, and if the creditor is going to report at all, the creditor should report the pendency of the bankruptcy or the history of the payments under the plan.
A copy of the decision can be found here.
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