Good news for up to a million bankrupt former debtors of Bank of America, JP Morgan Chase, Citigroup and Synchrony Financial (formerly GE Capital Retail Finance): In response to various lawsuits, those banks have generously agreed to start obeying the actual laws regarding debts that have been discharged in bankrputcy.
The New York Timesreports that the four banks faced various lawsuits in Federal Bankruptcy Court over their handling of “zombie” debts — bills which have been legally discharged in bankruptcy proceedings, yet still appear on credit reports. Various lawsuits accused those four banks of deliberately ignoring bankruptcy rulings in order to make extra money by selling bad debt to financial firms:
The lawsuits accuse the banks of engineering what amounts to a subtle but ruthless debt collection tactic, effectively holding borrowers’ credit reports hostage, refusing to fix the mistakes unless people pay money for debts that they do not actually owe.
The banks, for their part, maintain in court documents that of course they always comply with the law, and make sure they provide credit agencies with accurate, up-to-date information. In this week's agreement with the court, however, BoA and JP Morgan agreed “to update borrowers’ credit reports within the next three months to reflect that the debts were extinguished.”
Up to 1 million Americans are expected to benefit by having zombie debt expunged from their records.