Did you file for Chapter 7 or Chapter 13 only to find that your credit report still shows you owing many of the discharged debts? If so, you’re not alone.
Millions of Americans have errors on their credit reports after bankruptcy, and the issue has begun to garner attention from consumer bankruptcy lawyers who understand the problem. I’m not talking about charged-off debts showing up on your credit report. No, this is a scenario where you wipe out a debt and it still shows up as past due on your credit report.
The problem involves the credit card industry’s business model of buying and selling debts. Many companies sell debts once they charge off an account, moving the debt to a company that specializes in collecting past due debt. These debt buying companies usually pay a huge discount; in fact, Asset Acceptance Corp., a debt buyer owned by Sallie Mae (the student loan folks), recently announced that they’re paying 2.9 cents on the dollar for charged-off debt.
Under the Fair Credit Reporting Act a creditor is required to update a report once that creditor knows or has reason to know that the information is incorrect or incomplete. An example would be where the debt has been sold; the creditor would be required to update the tradeline accordingly. Unfortunately, this is not done in most cases.
To compound the problem, debt buyers have no interest in forcing the originating creditor to update the report. Why? Because if the debt is shown as past due, there is an excellent chance that the consumer will eventually pay.
So how do you fix the problem? First, you should be sure to dispute the inaccurate information your credit report. Second, you should speak with a qualified consumer bankruptcy litigator about your rights under the Fair Credit Reporting Act as well as under the bankruptcy discharge injunction.