Bank of America, Capital One, Chase and Discover Caught Actively Working to Undermine Bankruptcy Laws.

November 24, 2007 By Matthew Paulson

When you file a Chapter 7 bankruptcy, you’ll receive a nasty mark on your credit report for the next decade, but the plus side is that you get to get rid of all of your unsecured debts. It’s not as easy to get a Chapter 7 bankruptcy anymore due to recent legislation that was bought and paid for by the banking industry. In most cases you’ll have to pay back some part of your debt under a Chapter 13 bankruptcy repayment plan. The banks weren’t happy with just forcing almost everyone into a Chapter 13 bankruptcy in which they have to repay all of their debts through a payment plan and are now going after people who already filed Chapter 7 bankruptcy and trying to collect on debts which have been legally bankrupted away.

Business Week recently ran a story entitled “Prisoners of Debt” in which they reported that a group of banks, collection agencies and even credit bureaus were working together to undermine bankruptcy law. They found that Capital One, Bank of America, Chase, and Discover were all ignoring existing bankruptcy laws, whether by accident or on purpose, and selling debts illegally to collection agencies so that the collection agencies could go after you and try to collect the bankrupted debt. There was recently a court case in which a Chase lawyer testified to a judge that bankrupted debts are sold all the time in the industry.

The article in Business Week stated that the banks public relations arms said that these actions were an “unintentional mistake,” but let’s look at the facts. Multiple banks have neglected to wipe out people’s debt when they file for bankruptcy and then sell the debt off to a collection agency so they can collect the money. The credit bureaus then help by listing debts on your credit reports, even though they are not valid. There’s a clear financial gain for banks and debts and collectors to flaunt the law like this and since there’s been a clear pattern across a number of different companies with a large number of consumers who have filed bankruptcy, it’s very difficult for these banks to pass off these actions as an “unintentional mistake.”

If you’ve found yourself the victim of banks and debt collectors who are trying to collect bankrupted debts, contact the banks y phone and in writing and try to get them to update the status of your debts which are legally expired. If that fails, your best bet is to go back to the bankruptcy court where you filed and present the matter before the judge.

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