This just in! As originally reported in the New York Times and posted through Consumerists’ (@Consumerist) blog, JP Morgan Chase and Bank of America have both agreed to clear debt from credit reports that was discharged in bankruptcy. This is great news and about time the big banks acted in accordance with federal laws. These corrections would make a difference in improving the credit scores for millions of Americans.
Banks are coming under fire for their alleged practices in keeping consumers’ credit scores low in an effort to drive up interest rates on borrowed money. This news is a real win for consumers everywhere who may be considering filing for bankruptcy protection, yet are concerned over their credit scores.
Unfortunately, the headline from New York Times is inaccurate because the creditors do not necessarily need to completely remove their trade lines for debts discharged in bankruptcy. Rather, creditors are required to accurately report that the debts have been discharged in bankruptcy and the consumer owes nothing. Wiping out the debt always has a positive impact and improves credit scores. Even better is that the effect of a bankruptcy case on a credit score is usually offset by the benefit of wiping out balances owed on a credit report.
Practice Tip for Bankruptcy Lawyers should include listing the major credit bureaus on a client’s bankruptcy papers and put them on Notice. This not only will help get those credit reports cleared up more quickly for the consumer, but it also sets up Fair Credit Reporting Act Claims later should the credit bureaus fail to make necessary corrections after discharge. Be sure to ask your lawyer for this service.