credit-reports-hijacked-after-filing-bankruptcy

Your credit report should reveal a balance of $0 after filing for bankruptcy. Unfortunately, some people are learning the hard way that creditors aren’t always following the laws in place under bankruptcy protection. It is true that filing for bankruptcy is a big decision for any individual to make. However, it is often necessary when accumulated debts are burying you without any foreseeable way out of the mess.

Bankruptcy, particularly Chapter 7 bankruptcy, allows a consumer to file for protection against these debts, erasing them from the record, giving a $0 balance owed for all debts. It is a fresh start –  or at least that is the way that it is supposed to happen.

The Debt Remains

After bankruptcy has been filed and the judge places the order into effect, all or most debts should be erased from the credit report, giving the consumer the freedom to start over and take the right financial path. Individuals who choose to file bankruptcy are stressed and overwhelmed with the debt, so knowing that it is all soon to be over is a great amount of relief.

However, some unlucky individuals have filed for bankruptcy only to learn that those debts that were supposed to be legally erased remain on the credit report for some months and sometimes years, later.

After investigations into the practices of several of the world’s largest financial institutions, Bank of America, JPMorgan Chase, Citigroup and Synchrony Financial for failure to remove these records, as well as lawsuits being filed against the institutions, each financial institution agreed to make the changes within the next three months.

The lawsuits against these financial institutions were filed by Charles Juntikka, a Manhattan lawyer, and George F. Carpinello of the law firm Boies, Schiller & Flexner. Judge Robert D. Drain overheard the case, which was held in April. For anyone that has filed bankruptcy and is ready to get what they’re expecting this news couldn’t be any better.

The institutions are accused of allowing these legally erased debts to remain on consumer credit reports in order to continue profiting by selling those delinquent accounts to collection agencies as well as several other unethical tactics that benefited the company. This includes refusal to remove the record unless the debtor paid the debt amount. This comes after the debt has been sold to an outside collection agency who then tries to collect the amount that is owed, unaware that bankruptcy has discharged it

Despite agreeing to remove the records remaining on client’s consumer credit report, documents filed in court by the financial institutions claim no wrongdoing, and that compliance with the law is practiced every day.  They also stated their belief of the confusion occurs when debts are sold to those outside agencies.

Approximately one million people scattered throughout the U.S will be affected by this new decision. Not only has Bank of America agreed to erase all debts that have been discharged from consumer credit reports as law requires, they have also agreed to change the method in which a report is sold to a collection agency. Credit card debts that were accumulated after May 2007, and sold to collection agencies will be removed immediately from the credit report. This should ensure that future discrepancies do not arise.

How it should Work

After filing for bankruptcy and the judge puts the protection into place, any debts that are on your credit report should be listed as $0 owed on the amount, although delinquency history does not necessarily have to be removed under federal law. This change in the credit report should happen within a few short weeks of the judgement if it takes this long. After filing for bankruptcy, this status will be listed on your credit report where it will remain visible for anyone inquiring of your credit report to see.

However, you are deemed more creditworthy since the debts (if still listed) are at $0. It doesn’t take the entire seven years to rebuild after bankruptcy. However, those who filed bankruptcy and were unsuccessful in having their records removed have suffered greatly since your credit report, and credit score are both used to make decisions concerning everything from loans to jobs.

It is your responsibility to keep an eye on your credit report at all times but particularly so after bankruptcy has been filed. If you notice that debts have not been removed that should have been, submit a report to the credit bureau as quickly as possible disputing the debt as well as the amount that is owed. Usually, this will work in your favor.

For the time being you can rest just a little bit easier knowing that changes are underway. There couldn’t be a greater victory for those who have continued to suffer after they have filed for bankruptcy and should have had nothing to worry about.