How do Direct paid debts report on credit reports?

[Alex46]

We are one year into our Chapter 13. We've made our payments without issue, so no problem there. I have two mobile homes mortgaged (one 15k the other 20k). The lesser one was crammed down in the BK and the other (our primary home) is paid directly. On one credit report, the direct one shows as open, but no payment history. The other on all three shows closed. According to NDC, the Trustee has given the mortgage company over half so far on the crammed down home.

Forgive my ignorance, but does anyone know how IIB accounts are supposed to report? I understand the closed credit cards. But shouldn't, at the least, the primary home be reporting as open and paid since we pay that ourselves every month? It's "included" but noted as Direct in our BK filing.

The reason I ask, is that we are attempting to get a VA mortgage for a reasonable stick-built home so that we can move our elderly parents into our mobile home. My husband's scores qualify us, but I have two issues with mine..one, Experian isn't generating a score as it is showing everything as closed/IIB and so there is no score (so I'm stuck with the lesser of the remaining scores rather than a mid score from all three). Two, with the mortgage not reporting correctly, I'm thinking it's also contributing to my lower score. We've already got several reputable lenders who are good with VA guidelines of one year active Chapter 13 payments with no lates, but my one darn score is what is preventing anything moving forward..but I don't want to mistakenly assume how these accounts are supposed to report. Thanks in advance!!

[justbroke]

Included in Bankruptcy (or IIB for short) accounts are typically listed as $0 balance, no payment history, account closed by creditor grantor, and the type of bankruptcy. For Chapter 13s, it typically lists as "Included in Chapter 13", "Wage earner or similar plan", or "Debt included in or discharged through Bankruptcy Chapter 13" based on the credit bureau Equifax, Transunion, or Experian, respectively. Some creditors may accidentally list an account included in a Chapter 13 as simply "IIB" (included in bankruptcy) or put a Chapter 7 notation. Just to make it more confusing, you could also see notations (comments) such as "Debt included in or discharged through Bankruptcy Chapter 7, 11, or 12" or "Unrated".

As for items actually included in the plan (paying "outside the plan" is still technically "included in the plan"), the creditors will typically report these as "IIB" and show no payment history. The creditor does not want to violate the automatic stay provisions so are extremely cautious in these cases. If you need your mortgage to report, then you would need to contact your mortgagor and ask them to continue reporting the payments. Most lenders (mortgagors) would make you (or your attorney) sign a form waiving any issues that may arise from reporting.

[Alex46]

Included in Bankruptcy (or IIB for short) accounts are typically listed as $0 balance, no payment history, account closed by creditor grantor, and the type of bankruptcy. For Chapter 13s, it typically lists as "Included in Chapter 13", "Wage earner or similar plan", or "Debt included in or discharged through Bankruptcy Chapter 13" based on the credit bureau Equifax, Transunion, or Experian, respectively. Some creditors may accidentally list an account included in a Chapter 13 as simply "IIB" (included in bankruptcy) or put a Chapter 7 notation. Just to make it more confusing, you could also see notations (comments) such as "Debt included in or discharged through Bankruptcy Chapter 7, 11, or 12" or "Unrated".

As for items actually included in the plan (paying "outside the plan" is still technically "included in the plan"), the creditors will typically report these as "IIB" and show no payment history. The creditor does not want to violate the automatic stay provisions so are extremely cautious in these cases. If you need your mortgage to report, then you would need to contact your mortgagor and ask them to continue reporting the payments. Most lenders (mortgagors) would make you (or your attorney) sign a form waiving any issues that may arise from reporting.

Thank you for the great explanation! So, I'm wondering if I could pick your brain.

I've had several lenders (including Veterans United) who looked at our credit report and basically told me that all I need to do is get my own score up and that we would meet the guidelines for a VA mortgage. The person I'm talking with now, is the friend/lender of a flipper who has a home we are interested in. It's obvious in talking with him, that he isn't super familiar with Chapter 13 because he basically went through my Credco generated report and anything in red, he made an issue of..he is the one who brought up the unrated account listing, etc. (whereas other lenders said it didn't matter). As an example, one for example says wage earner plan-7, he said that number 7 designation means it's a chapter 7...correct me if I'm wrong, but that is just a "classification code" and not the actual BK number, right? I'm thinking this particular lender just isn't familiar with VA and its guidelines, etc. He also said that everything unrated has to be updated with payment history, his logic being that if the trustee is paying or I am paying, it has to be noted (although your explanation above makes much more sense!)

I'm guess I'm trying to understand why so many other lenders would see our reports and say no problem, while this one is making a huge issue and basically telling me get bent it can't be done.

[justbroke]

There is no way to gauge any lender and how "underwriting" will see something. Most loan officers know a little about what they typically expect from underwriting with some loan officers knowing a lot about the underwriting process. Then, just to compound the issues, underwriting (not underwriters) can be more difficult with one lender than another based on what risk profile they like. (That's even though VA and USDA programs guarantee loans, but the loan must pass underwriting requirements. Too many bad loans from a lender could affect their ability to offer VA and other loan programs.)

As for the "classification" code, please read what I wrote above. The creditors sometimes report the wrong type of bankruptcy to the credit bureaus. In my personal experience, a Chapter 7 notation is better than a "wage earner" or "Chapter 13" designation.

[Alex46]

There is no way to gauge any lender and how "underwriting" will see something. Most loan officers know a little about what they typically expect from underwriting with some loan officers knowing a lot about the underwriting process. Then, just to compound the issues, underwriting (not underwriters) can be more difficult with one lender than another based on what risk profile they like. (That's even though VA and USDA programs guarantee loans, but the loan must pass underwriting requirements. Too many bad loans from a lender could affect their ability to offer VA and other loan programs.)

As for the "classification" code, please read what I wrote above. The creditors sometimes report the wrong type of bankruptcy to the credit bureaus. In my personal experience, a Chapter 7 notation is better than a "wage earner" or "Chapter 13" designation.

Thanks! I guess I was just shocked, since so many other lenders reviewed the same credit report and understood what was IIB, etc. this particular person basically said not only no, but that if any lender tells me yes, they are lying. So, it was a bit deflating. Thanks for the great explanation!

[Alex46]

Included in Bankruptcy (or IIB for short) accounts are typically listed as $0 balance, no payment history, account closed by creditor grantor, and the type of bankruptcy. For Chapter 13s, it typically lists as "Included in Chapter 13", "Wage earner or similar plan", or "Debt included in or discharged through Bankruptcy Chapter 13" based on the credit bureau Equifax, Transunion, or Experian, respectively. Some creditors may accidentally list an account included in a Chapter 13 as simply "IIB" (included in bankruptcy) or put a Chapter 7 notation. Just to make it more confusing, you could also see notations (comments) such as "Debt included in or discharged through Bankruptcy Chapter 7, 11, or 12" or "Unrated".

As for items actually included in the plan (paying "outside the plan" is still technically "included in the plan"), the creditors will typically report these as "IIB" and show no payment history. The creditor does not want to violate the automatic stay provisions so are extremely cautious in these cases. If you need your mortgage to report, then you would need to contact your mortgagor and ask them to continue reporting the payments. Most lenders (mortgagors) would make you (or your attorney) sign a form waiving any issues that may arise from reporting.

Was wondering if I might ask one last question. Since everything you said makes perfect sense..what doesn't (to me) is that my mortgage company lists a failure to pay twice on my mortgages. These are from June of this year! So, it seems they are sort of on/off reporting. I guess that's why I was confused about how they report because they seem to have some stuff reporting (payment months) then some months have no data.

[Traders]

Included in Bankruptcy (or IIB for short) accounts are typically listed as $0 balance, no payment history, account closed by creditor grantor, and the type of bankruptcy. For Chapter 13s, it typically lists as "Included in Chapter 13", "Wage earner or similar plan", or "Debt included in or discharged through Bankruptcy Chapter 13" based on the credit bureau Equifax, Transunion, or Experian, respectively. Some creditors may accidentally list an account included in a Chapter 13 as simply "IIB" (included in bankruptcy) or put a Chapter 7 notation. Just to make it more confusing, you could also see notations (comments) such as "Debt included in or discharged through Bankruptcy Chapter 7, 11, or 12" or "Unrated".

As for items actually included in the plan (paying "outside the plan" is still technically "included in the plan"), the creditors will typically report these as "IIB" and show no payment history. The creditor does not want to violate the automatic stay provisions so are extremely cautious in these cases. If you need your mortgage to report, then you would need to contact your mortgagor and ask them to continue reporting the payments. Most lenders (mortgagors) would make you (or your attorney) sign a form waiving any issues that may arise from reporting.

My mortgage says "chapter 13 bankruptcy" on credit report. I'm paying outside of bk and thought I had reaffirmed it. Will a payment history and a dispute to CRA's not fix this?

[sophieanne]

Traders - Hi...we paid our mortgage on our own, but it's still part of the whole bk. As mentioned previously, your bk will show as "IIB" or "Chapter 13 bankruptcy" and will not report payments due to the automatic stay. Once your plan is completed your payments can start reporting again.

[justbroke]

My mortgage says "chapter 13 bankruptcy" on credit report. I'm paying outside of bk and thought I had reaffirmed it. Will a payment history and a dispute to CRA's not fix this?

Sophieanne has your answer. As I previously wrote, no creditor wants to be at the mercy of the bankruptcy court for violating the stay or permanent discharge injunction. It's unlikely that a mortgage creditor will report while your case is open. Even after a Chapter 13 case is concluded the creditor may not automatically resume reporting. You may need to be persuade the mortgage creditor to resume reporting.