Post-Bankruptcy Credit Reporting: Should The Account Still Show A Balance?

Did you finish a chapter 7 bankruptcy and believe that you had made a fresh start. Confidently walk into a car lot about six months after your bankruptcy to apply for a car loan and be stunned when the finance manager turned you down due to open accounts remaining on your credit report after your bankruptcy? Turned down for a prime rate on a post-bankruptcy mortgage due to those same open accounts? Good News!! There is hope ahead!

Consumers should be elated to learn of a recent settlement agreement in a California class action case, White v. Experian, in which the three credit reporting agencies agreed to update their procedures and report accounts correctly after a consumer’s bankruptcy discharge. In that case, the Plaintiffs alleged that the three credit reporting agencies violated the Fair Credit Reporting Act (“FCRA”) by recklessly failing to follow reasonable procedures in the reporting and reinvestigation of reporting of Chapter 7 discharged debts. Plaintiffs allege that defendants continued to report such debts as due and owing with balances when defendants knew those debts had been discharged in bankruptcy.

Post bankruptcy credit reporting issues have caused many problems with refinancing or purchasing items on credit for many Americans. This important decision was discussed in a recent issue of The Wall Street Journal and by my California bankruptcy colleague, Michael Doan on Bankruptcy Law Network.

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