Homeowner Sues Freedom Mortgage over Bungled Post-Bankruptcy Credit Reporting

Why It Matters

Improper post‑bankruptcy reporting can depress a borrower’s credit score and expose lenders and credit bureaus to costly FCRA litigation.

Key Takeaways

• Freedom Mortgage sued for improper post‑bankruptcy credit reporting
• All three major bureaus allegedly deleted disputed mortgage tradelines
• Metro 2 guidelines require removing bankruptcy references after discharge
• Errors could damage borrower credit scores and lender risk assessments
• Case highlights FCRA enforcement risk for servicers and bureaus

Pulse Analysis

The intersection of bankruptcy law and credit reporting is governed by the Metro 2 standard, which obligates furnishers to purge bankruptcy tags once a debt is no longer dischargeable. For borrowers emerging from Chapter 13, accurate reporting of ongoing mortgage payments is essential to rebuilding credit. When data providers neglect these updates, the resulting inaccuracies can linger on consumer reports, undermining the very purpose of the bankruptcy fresh‑start provision.

In the Paschal case, Freedom Mortgage allegedly failed to adjust the mortgage tradeline after the January 2025 discharge, while Equifax, Experian and TransUnion reportedly erased the disputed entries instead of correcting them. The plaintiff’s credit report showed a derogatory flag and, in TransUnion’s case, a missing balance despite continued payments. Such actions not only breach the Fair Credit Reporting Act’s dispute‑resolution requirements but also expose the parties to statutory and punitive damages, highlighting the legal and financial stakes of data integrity.

The lawsuit serves as a cautionary signal for mortgage servicers and credit bureaus alike. Robust compliance programs that routinely audit Metro 2 code applications and enforce proper dispute handling can mitigate litigation risk. Moreover, lenders must monitor borrower credit files post‑bankruptcy to ensure that reporting errors do not inflate loss‑given‑default calculations. As regulators intensify scrutiny of credit‑reporting practices, firms that prioritize accurate, timely updates will safeguard both consumer trust and their own bottom line.