Creditor Fails to Update Debts Discharged in Bankruptcy

One of the most common reasons people file bankruptcy is to get a fresh start on their finances. The problem is that there are some very serious consumer reporting failures in recent years that prevent debtors from gaining the full benefits of a discharge. Creditors often fail to report an updated status for discharged accounts or even continue to report the pre-discharge status. And the credit bureaus (Equifax, Trans Union, Experian) often fail to update accounts and judgments they knew had been discharged.

The failure to make these post-bankruptcy corrections can have serious and significant effects on Sacramento consumers. Although a bankruptcy itself is initially detrimental to a credit score, a debtor with a discharge will typically see an improved credit score month after month following the bankruptcy. The credit bureaus failure to update the report stymies that improvement. Another consequence of failure to report that a debt has been discharged is that creditors look at a credit report entry that reflects a past due account much differently than one that has been discharged. The difference is that one is an ongoing issue and the other is an historical fact. That can make a big difference in a creditor’s eyes.

Inaccuracies after bankruptcy discharge happen all the time. A large number of creditors never report a prepetition collection account as discharged or “included in bankruptcy.” These creditors get so preoccupied by trying to avoid violating the automatic stay that they don’t remember to update the account after the bankruptcy. What’s worse, many of them even continue to report consumers’ debts as due and owing even after they are notified of the discharge.

These actions, or inactions, are often violations of various laws, including the Fair Credit Reporting Act (FCRA) and bankruptcy laws. However, they seem to get away with it most of the time because people are tired of courthouses by the time they finish bankruptcy. But that is exactly what these companies count on. Some people, and even judges, have observed that the vast number of cases of post-discharge credit report problems suggest that some creditors are systematically taking these actions in an effort to diminish the power of a discharge in bankruptcy.

One way to combat these problems is to be proactive and seek the assistance of an attorney who is experienced in dealing with credit report issues and bankruptcy. While it is rare to find an attorney well-versed in both of those topics at the same time, it can make the process of disputing credit reporting errors much more manageable. Plus, an attorney may be the only one who can help if those disputes to the creditors and credit bureaus fall on deaf ears (as they so often do.)

It can be very difficult to make the decision to file bankruptcy and it can be emotional draining. It makes sense that a consumer who has gone to the trouble of filing bankruptcy and achieving a discharge should take the few extra steps to make sure they get credit for it.