They paid the mortgage off and never left the house - their credit file said otherwise
A New Jersey lawsuit says mortgage company Onity and credit bureau Equifax reported a fully paid mortgage as a derogatory Chapter 13 account.
According to the filing, the borrowers took out a mortgage on their primary residence in or around October 2012 through PHH Mortgage Corporation, now known as Onity Mortgage Corporation. In credit-reporting terms, Onity is the furnisher - the company that reports the account's information to the bureaus like Equifax.
On or around July 31, 2020, the lawsuit says, they filed for Chapter 13 bankruptcy protection. Their repayment plan required them to keep paying the mortgage directly, outside the bankruptcy - and the suit states they did, completing every payment, keeping the property, and continuing to live there. Their Chapter 13 discharge came on August 5, 2025.
The dispute centers on what happened next. In January 2026, the borrowers pulled their three-bureau credit reports and found the mortgage reporting inaccurate, the filing says.
On the Equifax report, according to the lawsuit, the account showed a payment status of "Wage Earner Plan," an account rating of "Derogatory," and a creditor remark reading "Account involved in Chapter 13 debt adj." The filing contends the account should instead have reported a "Current" status, a "Paid/Closed" rating, a high balance of $173,925, and a remark noting the mortgage was closed or paid with a zero balance.
The borrowers allege the derogatory entry "materially misleads lenders to believe" they surrendered the property and discharged the mortgage as unsecured debt through bankruptcy - which, the filing says, is not what happened.
The borrowers disputed the reporting on or about February 14, 2026, court papers state. Equifax responded on February 23, 2026. Rather than making the requested corrections, the lawsuit alleges, Equifax "deleted the Onity mortgage without explanation." The filing claims Equifax "seemingly saw the word 'Bankruptcy'" in the dispute and removed the tradeline without contacting Onity to investigate. In the alternative, the suit pleads that Equifax did forward notice of the dispute to Onity, and that Onity then failed to conduct a lawful investigation.
The lawsuit draws a contrast with the other two bureaus. Experian and Trans Union, which are not defendants in the case, each corrected the account and reported it as transferred and closed, without the negative bankruptcy indicators, according to the filing.
As for Onity, the suit alleges the furnisher "knows how to report the Onity mortgage accurately" but gave the bureaus a response it describes as "willfully reckless."
The borrowers bring claims under the Fair Credit Reporting Act: Sections 1681e(b) and 1681i against Equifax, and Section 1681s-2(b) against Onity. They seek actual, statutory, and punitive damages, along with injunctive relief and attorney's fees.
The lawsuit was filed on August 4, 2026, in the US District Court for the District of New Jersey. The allegations have not been tested in court, and no court has ruled on any of the claims.
