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Debt discharged in bankruptcy may still be showing up on reports

One of biggest advantages of filing Chapter 7 bankruptcy is the discharge of most or all unsecured debt. This means that credit card bills, medical bills and other debts (which may or may not have gone to collections) can be forgiven. Once the process is completed, filers will have no legal obligation to pay back discharged debts.

At least this is the way things are supposed to work. Unfortunately, some of the nation’s largest banks seem to be in collusion with debt buyers to essentially keep old debt on a person’s credit report by ignoring discharge injunctions. Although the practice of continuing to pursue discharged debt is illegal, many bankruptcy filers feel forced to pay the debts because they cannot afford any more damage to their credit reports.

According to a recent news article, banks engaging in this illegal behavior often do so in collusion with collection agencies and other debt buyers. By keeping discharged debts on a person’s credit report, banks can put pressure on consumers to pay money they no longer owe. Because the banks have given themselves this leverage, they can also sell discharged debt to debt buyers with the understanding that banks will pass along payments made by customers.

It should be stated plainly and repeatedly that this practice is illegal. But investigations often take so long and litigation can be so costly that most consumers feel they can’t afford to fight the “zombie” debt. Bankruptcy has already lowered their credit score significantly. Having zombie debt on the credit report can ruin the chances of getting approved for a lease, a mortgage or even a job.

If you have gone through the bankruptcy but are still suffering the effects of zombie debt, please contact your bankruptcy attorney. He or she may be able to help you stop this illegal and unethical practice.

Source: The New York Times, “Debts Canceled by Bankruptcy Still Mar Consumer Credit Scores,” Jessica Silver-Greenberg, Nov. 12, 2014

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