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New Bill Would Help Consumers Get Debts Removed From Credit Reports After Bankruptcy

September 11, 2015

Filing for bankruptcy protection means the bulk of debts are discharged. With the help of a Utica bankruptcy attorney, you may be able to file Chapter 7 bankruptcy and be absolved of your responsibility to pay back money owed. After a debt is discharged in bankruptcy, creditors are no longer legally able to make any move towards collecting the debt.

The debt should be noted as discharged on your credit report and you should no longer have negative reports of late payments or unpaid debts made each month by your credit card company.

However, the problem is that while debts are being discharged, not all companies are behaving honestly or scrupulously. Some continue to report bad debt or “zombie debt” to credit reporting agencies. Consumers are having their credit scores hurt by this, even though bankruptcy is designed to give you a clean slate so you can rebuild your credit.

While you have options for recourse if creditors are acting improperly related to debts after bankruptcy, a proposed new law could give more help to consumers who are struggling with banks that are making unethical negative reports of discharged debt.

Bill Aims to Ensure Removal of Debts Discharged in Bankruptcy

According to Consumerist, the proposed new law to help consumers is called the Consumer Reporting Fairness Act of 2015. The goal of the proposed legislation is to make it easier for consumers to get accurate credit reports and fix errors and mistakes on their credit report after a bankruptcy filing.

If it passes, the Consumer Credit Reporting Fairness Act would require creditors and debt collection agencies to provide notification to credit reporting agencies after bankruptcy results in the discharge and cancellation of consumer debt. If the creditor or debt collection agency fails in its obligations and credit reports continue to be inaccurate despite the lender’s obligations, consumers would be given the right to sue for damages.

The proposed law solves a number of possible problems, including issues that arise when a large bank sells debt to a third-party collector. Under the law as it stands, there is no explicit requirement that these third-party debt collectors always notify credit reporting agencies of the fact that bankruptcy has led to a debt discharge.

Several consumers have already filed lawsuits accusing banks of failing to make accurate, updated reports in order to have debt correctly reflected as discharged on credit reports. Even without the passage of the Consumer Reporting Fairness Act, consumers who go bankrupt are still protected from abusive behaviors by the bankruptcy code, and a bankruptcy attorney in Utica can help debtors understand how the law protects their rights.

There are laws to allow former debtors to take action and regulators are making a concerted effort to go after abusive financial institutions. JP Morgan Chase just recently paid $136 million and agreed to revamp its debt sales after regulators discovered the bank was selling zombie or discharged debts.

Still, a new law that provides more protection to consumers after bankruptcy could help to significantly reduce the number of people who find themselves dealing with bad data on credit reports even after going through the bankruptcy process.

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