It is not easy or fun to declare bankruptcy. You have to spend money and time. You have to bear the stigma of telling the world you did not pay your creditors what you owe them. The debt often is the result of medical bills or the loss of a job.
The biggest insult is to go through bankruptcy and still have the debt appear on your credit report. It is called “zombie” debt.
When their credit was checked, and zombie debt appeared, victims lost chances for jobs and could not get loans. Victims of false credit reports sued the banks to get the debts removed. Two banks, and now others, have agreed to stop the practice.
Why did the banks continue to list the debts when bankruptcy had discharged them?
It is hard to believe how greedy banks can be.
The banks kept the debts on the books in order to sell the debt to collection agencies. The banks denied this, saying this practice made no sense since they no longer had a stake in settling the debts. However, they do make money by selling the debt.
The banks did not admit wrongdoing. They did say they would stop doing it. They will now note on credit reports when all debts were discharged.
Were the banks simply ignoring federal bankruptcy laws? The federal government is looking into it.
More than one million Americans will be helped by the agreement.
Source: The New York Times May 8, 2015