Q: mortgage loan approved by lender but at final review they discover the membership account had been revoked.
The member 8-9 years ago was in chapter 13 and represented a loss for the lender. Can they asked the member to re-pay the old balance that was cleared and discharged from CH13?
A: The so-called "permanent injunction", against creditors' attempting to collect a discharged debt, which accompanies the entry of every Discharge Order in bankruptcy, certainly seems to prohibit that sort of "ask". On the other hand, nothing in a bankruptcy Discharge requires a future creditor to fund a new loan to a discharged debtor. I've been representing credit unions for the past few decades, and most have Membership Rules that provide that causing financial harm to the CU will disqualify that member from future loan consideration, and may actually result in loss or suspension of membership privileges.
Under current law, a debtor who obtains a bankruptcy discharge is prohibited from getting another for 8 years, so for at least that period of time, a discharged debtor is a safer loan risk than other non-bankrupt borrowers. Not many creditors/lenders seem to grasp that fact.
A: They can ask, but they cannot demand. Mr. Winterstein set it out succinctly.
May I suggest that you consult an independent mortgage broker. They are usually equipped to handle oddities, and like casualty insurance agents, they can "shop the deal".
I think that it is a bad move from a PR standpoint to hold an old bankruptcy discharge over an applicants head in the hopes of collecting a stale obligation.
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