Lawsuits prompt Bank of America and JPMorgan Chase to update credit reports to eliminate consumer zombie debt

Imagine being consistently denied for employment due to negative marks on your credit report. Now, consider those same negative marks on your credit are discharged through a bankruptcy, but are still on your credit report. Some people have been compelled to pay off discharged debt because the banks have them over a barrel and refuse to update your credit report. Diane Torres is one of these victims. Ms. Torres went through bankruptcy in 2010 and received a discharge of certain debts. Two of the discharged debts, a Chase credit card and another from GE Money Bank, were still showing as delinquent accounts on her credit.

Job offers and loan approvals can require positive credit scores. Even after bankruptcy, some lenders refuse to clear reported debts from consumer credit reports.  

Ms. Torres applied for a job at a credit union. They told her they could not offer her the position unless she cleaned up the negative marks. ““I felt desperate,” she said. “It was urgent that I pay these debts or else I would not get the job that I really needed.” But after, at the suggestion of her bankruptcy lawyer, she provided the credit union with a record that she had voided the debts in bankruptcy, she got the job.”[i]

Ms. Torres is not alone, but she is lucky the credit union told her why her offer was in jeopardy. Many others simply do not receive offers after promising job interviews and they might never learn that the deciding factor was a negative credit mark; one which may have been discharged in bankruptcy.

When the bankruptcy court discharges the debt, that debt becomes uncollectable as a matter of law. The discharge does not automatically clear the credit score for someone who went through bankruptcy. In many cases, bankruptcy clients report they are being bullied into paying off credit cards with banks refusing to budge, despite the bankruptcy.

 Bank of America and JPMorgan Chase, both involved in lawsuits in federal court on this topic, agreed that they will update borrowers’ credit reports.

Zombie debt is commonly known as debt that has been discharged in a bankruptcy, written off, or otherwise no longer collectable for a variety of reasons. When these debts are bought and sold among finance companies the consumer loses. The recent announcement that these banks will put the zombies of consumer debt to rest is good news, “bills that are still alive on credit reports although legally eliminated in bankruptcy,[ii]” should be updated within the next three months.

The New York Times reported, “The lawsuits accuse the banks of engineering what amounts to a subtle but ruthless debt collection tactic, effectively holding borrowers’ credit reports hostage, refusing to fix the misstated unless people pay money for debts that they do not actually owe.[iii]

Joseph Wrobel, Ltd. can help clients with zombie debt problems and financial catastrophes, generally. Joseph Wrobel, Ltd. helps people get control of their finances and a fresh start at financial freedom. The firm’s website contains informative videos about financial issues as well as bankruptcy protection for families who want a fresh start. To keep in touch and read about consumer finance news and stories you can Like the firm’s Facebook page and Follow Joseph Wrobel. Ltd. on Twitter. If you need immediate legal assistance, please call Joseph Wrobel, Ltd. by calling (312) 781-0996 to talk to an attorney today.

[i] New York Times, Bank of America and JPMorgan Chase agree to erase debts from credit reports after bankruptcies, by Jessica Silver-Greenberg, May 7, 2015.

[ii] See HNi

[iii] See HNi