By Alfred Villoch, III, with Savage, Combs & Villoch, PLLC
On November 12, 2014, the New York Times published an article entitled “Debts canceled by bankruptcy still mar consumer credit scores.” In the article, the author, Jessica Silver-Greenberg, explains that “Tens of thousands of Americans who went through bankruptcy are still haunted by debts long after — sometimes as long as a decade after — federal judges have extinguished the bills in court.” This article was also featured in the Tampa Bay Times on Friday, November 21, 2014.
Lawyers with the United States Trustee Program, a group charged with overseeing federal bankruptcy cases, are investigating certain banks, such as JPMorgan Chase, Bank of America, Citigroup and Synchrony Financial (f/k/a GE Capital Retail Finance), because these banks are suspected of violating bankruptcy law and ignoring the discharge injunction. Section 524 of the bankruptcy code provides a “discharge injunction” where creditors are no longer allowed to pursue debts canceled or discharged in the bankruptcy case. The banks allegedly ignore the discharge injunction when they know (or should have known) the debt was canceled but still seek to collect the debt, whether by continuing to report it on the person’s credit report, sending letters, or making telephone calls about the canceled debt. Often times, these are not clerical errors, but debt-collection tactics. In some cases, the banks purportedly refuse to correct the “mistakes,” insisting that the canceled debt be paid. An example cited in the article was The Vogts, a couple in Denver, who paid JPMorgan $2,582 on a debt that was discharged in bankruptcy because they needed a clean credit report to get a mortgage.