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Illegal debt collection practices - the debts discharged in bankruptcy years ago magically reappear - do creditors forget to update credit reports on a purpose?

Fri Nov 2, 2007 10:11PM | By Tony

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Illegal debt collection has been going on since probably the first collection agency got its licence. But when it comes to respected banks and credit card companies, the whole idea of illegal debt collection practices seems so remote that is simply unlikely. However, this happens more often than you may think. The debts discharged in Chapter 7 bankruptcy a while ago, are back on your credit report as live records. And right in the moment when you are buying a house.

You furnish all the paperwork to the perspective lender proving your case, only to hear "we are sorry, but unless this debt is satisfied one way or the other, you don't get a mortgage". Or a collection agency, sometimes a few, start calling you, demanding payment of the long forgotten debt which of course was wiped out clean by the bankruptcy.

These discharged debts have become a hot commodity and attracted the attention of few little-known firms which are experts at buying and selling a range of delinquent consumer obligations. Theoretically, bankruptcy law prohibits efforts to collect discharged debt, but the reality is far from being that simple.

Often, the lenders initiate illegal debt collection practices and continue squeezing a consumer to pay off a discharged debt, or they simply report it as an active or a live account. And if their timing is right, they will squeeze you all right.

Of course you can fight back and win, but the very idea, that the Chapter 7 bankruptcy always gives you a fresh start might appear less certain, after you read more on illegal debt collection of long discharged debt.

Comments

Just read the business week article about this very problem. I think the credit card company sells the debt to a collection group - then they sell it to someone else - and the disconnect occurs. It's been impossible for some people to correct this issue.

Posted by: barry broome | November 3, 2007 10:47 AM

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