LadynRed

Negative reporting on discharged debts - UPDATED

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This subject comes up over and over again daily. Hopefully this will provide the needed answers.

The most-asked question: 'How should debts included in bankrutpcy be showing on my credit reports ?'

The answer:

All debts that were included in your bankruptcy should be reporting with a ZERO balance, show ZERO due, show nothing past due after the date of your bankruptcy filing, and should be noted as "included in bankruptcy' or similar verbage. If the tradeline does not report this way, dispute anything and everything that is wrong.

If you have account history that includes lates and charge-off that occurred BEFORE you filed for bankrupcy, that history can legally continue to be reported. If there are incorrect dates, dispute it.

A discharged debt can NOT be late - ever. So if a creditor reports a late for a date AFTER your bankruptcy FILING date, and certainly post-discharge, dispute it.

Charge-offs. Per the FTC, if a debt was not in charge-off status BEFORE you filed for bankruptcy, it can NOT be reported as a charge-off AFTER your bankruptcy, The FTC Staff Opinion letter, Brinkerhoff-Lovern states the following:

April 24, 1998

Mr. Michael Lovern, Sr.

President

TRIAL MANAGEMENT ASSOCIATES, INC.

8972 Quioccasin Road - Suite 172

Richmond, Virginia 23229

Dear Mr. Lovern:

David Medine asked me to respond to your Fax transmission of December 26, 1997, requesting our views concerning the legality under the Fair Credit Reporting Act (FCRA) of a credit bureau report of an account that has been discharged in bankruptcy as "charged off as bad debt." We acknowledge receipt of your request, pursuant to the Commission procedure set forth in 16 C.F.R. §2.2(a), for an investigation of the credit bureau.

Section 607(B) of the FCRA requires credit bureaus "to follow reasonable procedures to assure maximum possible accuracy of the information concerning the individual about whom the report relates." In our view, it is not a reasonable procedure to label an account that has been discharged in bankruptcy as "charged off as bad debt" if the account was open and not charged off when the consumer filed bankruptcy. Such a designation would be inaccurate or misleading, because it would indicate that the creditor had written off the account at the time of bankruptcy when it had not in fact done so.

Thank you for the information and documentation you submitted to us in connection with your request that we investigate this credit bureau's practices. As you may know, it is Commission policy not to comment on the status or existence of any nonpublic investigation.

The opinions set forth in this informal staff letter are not binding on the Commission.

Sincerely yours,

Clarke W. Brinckerhoff

While creditors are required to charge-off bankrupted debts for their internal accounting, they are NOT supposed to report that charge-off to the credit bureaus.

Any IIB tradeline that is not reporting properly, you must dispute first with the credit bureaus. If it comes back as 'verified', then you must dispute it directly with the FURNISHER of the information as is your right under FACTA. If they refuse to remove the negative entries on a discharged debt, then you are going to have to get tough and you MUST consider the possibility that you may have to re-open your bankruptcy case for a Contempt action against the furnisher.

NEGATIVE REPORTING ON A DISCHARGED DEBT IS A VIOLATION OF THE PERMANENT INJUNCTION OF YOUR DISCHARGE !

There is case law to support this. The case is Goodfellow vs. Discover Financial Services and you can read that case here:

http://207.41.19.195/scripts/show_matches....ings=Goodfellow

Pertinent to the reporting violations is the following from the BK court's decision:

"In addition to contacting Debtor, Discover Financial Services, Inc. apparently placed information concerning Debtor in various credit report agency files. Experian and TransUnion report that Debtor's account was in excess of 90 days past due as of March 2003. "

.... ." In addition, she suffered damages because of the placement of her account in a reporting agency after Debtor took bankruptcy and after the entry of discharge. Because of these violations, Debtor was required to incur attorney's fees and appear in court to defend her rights. "

So, what you must do if you are getting nowhere with a creditor/collector with disputes is to send them a Cease and Desist letter. In this letter you tell them that if they do not immediately cease and desist their negative reporting to the CRA's , you will file a Motion for Contempt and Request for Sanctions against them in bankruptcy court (name the district you're in). Per the Goodfellow case (cite the actual case name), negative reporting on a discharged debt is a violation of the permanent injunction of your discharge (list BK case number, filing date, discharge date) and as such they are in contempt of a Federal Court Order with their continued negative reporting on the discharged debt.

Besides the sanctions the BK judge can levy on the offenders, you can recover ALL attorney's fees, court costs and DAMAGES so don't be afraid to take the next step and actually file the Contempt Motion against them if they do not correct your reports.

The ONLY way we will stop this behavior of poisoning our credit files post-discharge and robbing us of our "fresh start", is to actually start going after these offenders in bankruptcy court where the bankrutpcy judges have a lot of clout.

***UPDATE - NEW CASE LAW ***

Continuing to report a discharged debt as due and outstanding after bankruptcy is a violation of the US Bankruptcy Code, says the U.S. Bankruptcy Court for the Middle District of Florida.

The case? In re Fox, 3:05-bk-12267 (Bankr. M.D.Fl). Here, the court relied heavily on two of my cases, Russell v Chase Bank USA, NA (In re Russell), 378 BR 735 (Bankr. EDNY 2007) and Torres v. Chase Bank USA, NA (In re Torres), 367 BR 478 (Bankr. SDNY 2007), for the propositions that

[w]hen a creditor falsely reports unpaid balances which are stayed or discharged by a bankruptcy, it impermissibly attempts to collect that debt in violation of the automatic stay . . . and the discharge injunction . . .

The case involved a prepetition debt due to Navy Federal Credit Union. I am glad to see that the Court chose to follow the sound logic of the Torres and Russell courts, though it always concerns me when I see a new case come out on this topic.

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Good for her. It's nice to see someone slay Goliath, even if the bounty was small.

I can think of several people who can use this case-law...

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What I have read about this case indicates that the defendants TL's were added Post BK. Could this be applied to a CA that reported before the BK and continues reporting post BK?

For instance:

1. AAC reported 3 TL's prior to my BK-7.

2. AAC did report that I filed BK-7 and made the balance reflect $0.

3. I have disputed these 3 TL's since my discharge.

4. The CRA's verified.

5. I have not been contacted by mail or phone by AAC, so that isn't a problem.

Is AAC now in violation of the BK code? Is continuing to report considered collection activity? If so, is the same true for an OC?

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That depends on what they're reporting. If what they're reporting is a negative AFTER the BK filing date, then its a violation. For example, they can't report a late or a charge-off AFTER the bankruptcy filing date. However, if what they're reporting is just the HISTORY of the account PRE-BK, then that history can remain as long as its ACCURATE, complete, and verifiable.

ASSet is nasty, and they re-age so go over their reporting with a fine-toothed comb. Dispute anything that is inaccurate.

And yes, reporting to the bureaus IS considered collection activity if they're reporting a balance due etc.

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what if a creditor is reporting a charge off after the real discharge date and then reporting a false bankruptcy date? is that still the same as a chareoff after bankruptcy?

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If they are showing the charge-off date as being AFTER the bankruptcy filing, then YES, that is a violation. If the account was NOT in charge-off status BEFORE you filed, then they cannot report it as a charge-off AFTER either.

ANY inaccuracies in dates should be disputed.

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........ However, if what they're reporting is just the HISTORY of the account PRE-BK, then that history can remain as long as its ACCURATE, complete, and verifiable.

According to this federal website which appears to be part of GSA, any discharged debt CAN NOT show any payment history.

http://www.pueblo.gsa.gov/cic_text/money/personalfin/lesson6.htm

WHAT TO LOOK FOR ON YOUR CREDIT REPORT

After you request your credit report — and be sure to request your reports from each of the Big Three repositories — allow 7 to 21 days to receive it. After you receive all of your reports, it is a good idea to follow these steps:

1. Determine the date all account information was reported.

2. Verify the current status of the accounts. Once a debt is discharged, verify that the credit report indicates a discharged status. It is important to note that payment history on a discharged account should also be removed.

3. Verify that all accounts that were discharged by your bankruptcy plan show a zero balance.

4. If there is a written comment about bankruptcy on any creditor entry, it should show that the debt was included in a Chapter 7 Bankruptcy

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The FTC says that history BEFORE your BK CAN stay, it goes to history. There can be no negative reporting AFTER bankruptcy. Even if you pay on a discharged debt vountarily, the creditors won't show any payments post-discharge.

A payment HISTORY is not always derogatory, many people have good accounts and good histories before they file and completely erasing the history on those kinds of accounts would be a bad thing. The LENGTH of your credit history is a factor in the FICO scoring model.

I'd like to see the rationalization for removing ALL payment histories on discharged debts. The bankruptcy appeals case law only supports that ANY negative reporting on a discharged debt AFTER the BK filing date is a violation.

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LadynRed,

I've been hunting all over for the specific statements that you mentioned (ok to report pre-BK but not post-BK, etc). I've tried reading the FCRA, etc but didn't see it. Have some emails to attorneys and maybe they'll reply back. Could you point\link specifically where I can start reading those "laws" as to how the credit report should read (ie, IIB, zero balance, etc for discharged debt)? Many thanks if you do.

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....The bankruptcy appeals case law only supports that ANY negative reporting on a discharged debt AFTER the BK filing date is a violation.

If I filed a skeleton (incomplete schedules) for a Chapter 7 initially say on Oct 14, 2005, submitted the completed schedules on Oct 31, 2005, case was successfully discharged on say Jan 19, 2006, does that mean if a creditor reports any activity after Oct 14 (or is it Oct 31?), that means there is a violation? I'd greatly appreciate a link to that case law as I've got a couple of those on my CR right now! Wish you were my neighbor as I'd be BBQing a steak for you right now.

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The case law is the subject of this thread and the case is in my first post above.

Your case was FILED on 10/14, that is the date that should be on your reports.

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We had a boat reposessed during bankrupty... after filed......

got it back, never reaffirmed... but got an alert they indicated 4 late payments after they returned the boat?

Is that leagal?

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Yes, it is a violation of your discharge to be reporting negatively on a discharged debt. It makes NO difference if you are continuing to pay to keep the boat, but the negative reporting is a violation.

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I filed CH13 in may 2002 and completed plan (discharged) sep 2005. Some OCs still report CO instead of CH13 on my CR. Called them, they say it's legal.

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No, it is NOT legal. What did you expect them to say ??

The FTC says if the account was not in charge-off status BEFORE you filed for bankrutpcy then they can NOT report it as such AFTER you filed.

Dispute it with the credit bureaus, in wriitng. Then dispute it with the creditor if you have to. If they won't behave, go for the contempt charge in bankruptcy court.

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Am I understanding this right? If you had a BK, anything that was included and discharged in the bk should not be on the credit report? Or It can be on the credit report but just say discharged? And How long does it have to stay? 10 years too?

One other question, I know that the CRA keep a BK on record for 10 years, but how long does the courts keep that info? forever? I am in CT.

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Yes, Laura Jean I have the same question. I am trying to help a friend navigate her way through her credit repair. She filed ch. 7 bankruptcy. After viewing her credit reports she has several listings under "adverse accounts" or "negative items" that were included in the ch. 7. Most show 0 balance or is left blank, only a couple have negative payment histories reporting. So my first question is are the accts included in ch. 7 still able to be reported? And if so, for what length of time?

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Accounts that were included in your bankrutpcy should say so. They should have a ZERO balance, NO negative history AFTER your BK filing date, and say "included in bankruptcy' or similar language.

As for the individual accounts, they can only stay for the legal 7 years plus 180 days starting from the date of first delinquency that immediately preceded placement for collection and/or charge-off. So, if you had accounts that went delinquent before you filed for BK, those negatives will drop off long before the bankruptcy itself will.

Account history that happened BEFORE you filed, can legally stay.

Any NEGATIVE entries or incorrect reporting AFTER your bankruptcy date fall under this case law.

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Thank you LadyNRed. After reviewing her credit reports in more detail there are several reporting "paid" before the actual filing of the bankruptcy and other errors. My question is, is it possible to get these tl's removed based on inaccuracies reported or is the most that the CB will do is CORRECT the information? Addtly, a Vickies Secret acct. is (1) reporting extremely negative payment history after the bankruptcy (2) reporting open/paid as agreed (3) reporting included in ch. 7. Since there are so many errors in the VS tl should it be disputed to be completely removed?

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You dispute anything that is not 100% accurate. If the CRA cannot verify what's on the tradeline, then it MUST be deleted. You may get deletions, many people do. If it VS comes back as 'verified' or 'remains' then it's time to dispute directly with the creditor as is your right per FACTA.

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LadynRed,

Wow. Thank you so much for this HUGELY valuable information! I have this going on right now and BEFORE I read this (a few days ago) I sent out disputes based on this. I wasn't exactly sure if I had a leg to stand on with this but I was willing to give it a try. Now that I have solid information, they will surely see things my way. Cap1 and a bank that had my auto loan are the offenders.

Interestingly enough is that I am in Chap13 repayment with 2 years left but have managed to obtain some 10 positive trades. The downside is that these SOB's are doing this and killing any work I've done by showing recent payment history of late and things of that nature. Not only that, the bank changed names and are on there twice! One showing lates and selling the loan. BUT they changed names AFTER the BK.

Thank you, thank you, thank you for this priceless information! I will surely be able to beat them down now. Kudos to you! You just made my day!

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LadynRed,

Do you recommend disputing and attempting the remove the tradelines completely first, THEN if they won't remove, insist on correct reporting?

I've read (somewhere...) that credit card companies especially will purge your acct info after a BK to make room for new customers. If the info can't be verified, it's deleted, so is that the best, first course of action?

How does "Included in BK" affect your score as opposed to deleting the TL completely?

As a follow to deleting the TL's what's your take on disputing and removing the BK from your credit report? There are a lot of conflicting opinions, but I don't think I've run across yours (which I'd like to know, since you're my new credit hero!)

::allhail::

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Always go for the deletion. If you can get it, great, if you can't, then make sure it's reported correctly. If a TL is incorrect and IIB, like not showing as IIB, then it can damage your 'fresh start'. If it is reporting correctly, then a deletion isn't going to hurt you at all really. You may lose some history if it's an account you had for a long time, but the impact should be minimal.

My take on disputing the bk.. if you can get it off, fantastic. However, even if you do succeed it could come back. You did file BK and its there, somewhere, on the public record so it can legally re-appear as long as it's accurate. If you delete the bk, but still have 'iib' accounts on your credit, it could be a problem, but the big hit from the BK itself would be eliminated.

If you still would be left with a lot of charge-offs etc, it may not help your score much at all unless your BK is already several years old.

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I appreciate all the information you have posted on this. I'm having a problem with a couple of creditors who are stating that they are exceptions. One is a bankcard company who has said that the FTC letter quoted is not a legally binding opinion and that they will not accept it.

They are also stating that the Goodfellow case was more about the harrassing phone communications than the entries in the credit record. They deny that placing a post-filing charge off is an attempt to harrass or collect and that since they did charge it off 2 months after I filed (was never late), they have a right to report it.

I'm trying to keep from having to use my lawyer as he wants over $700 per company that I woulld have to file against and he wants it up front! He is not real excited about doing it anyway, but I am not sure how to find an attorney who is knowledgable in this area.

Is there an official FTC ruling, rather than a staff opinion on bankruptcy reporting? Have any other cases been litigated that could be used to get these companies to straighten up?

Does anyone have any ballpark of how much attorneys would normally charge to reopen a case for this?

Thanks.

Wendell

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