# Some Banks To Erase Bankruptcy Settled Debts From Credit Report



## WhatInThe (May 9, 2015)

A couple of banks have to decided to erase bad debt settled with bankruptcy from a credit report.

http://www.nytimes.com/2015/05/08/b...m-credit-reports-after-bankruptcies.html?_r=1


I'm not 100% on this. I understand the financial emergency like a medical event or catastrophic fire/damage to one's house but there is also a lot of debtors out there that made poor decisions(not just as after thought either). I know people that racked up debt on entertainment alone and had to or decided to declare bankruptcy. Now keep in mind this this policy only removes bankruptcy related debt which means one must go through the process of bankruptcy. And by the time someone can be considered for bankruptcy their credit score has already been dinged especially by the credit card companies which tend to write of their debt fairly quick. Sometimes you have to live with your decisions and consequences.


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## WhatInThe (May 9, 2015)

This seems to be a problem of how "dead" debt is handled, especially by those who buy it. To me if a debt collector has bought your debt they have bought any responsibility that comes along with it. The dead debt collector or current owner of that debt should be held responsible for the status of that bill/credit report, not the original holder. 

It seems now that the banks will be charged with making more encompassing ways/procedures to handle dead debt or closed accounts. Part of the problem is education & disclosure. People must realize and should be told in detail what happens to their debt every time it is sold.


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## Son_of_Perdition (May 9, 2015)

It's easy for us armchair financial quarterbacks to criticize consumers today.  Back after 2009 when I retired at the height of the economic downturn I was reading an article that stated that the fastest growing segment of society who were filing bankruptcy were seniors.  They were caught between rising health care costs, homes losing value and horrendous value drops in their 401K's and nest eggs.  There wasn't funds available to better position themselves financially.  Pensions were canceled or cannibalized by their unions, cities or states.  Living expenses were rising at alarming rates and jobs became non-existent for the senior who wanted and needed to work to supplement their retirement.   

Younger seniors were shown the door and found that when they were making 90K plus and then needing to rely on subsistence from unemployment things only got worse.  They started racking up credit card debt to meet their obligations and payments that were still coming without the relief of the larger paycheck.  Homes were in jeopardy of foreclosure and the chance that they may sell them to get out from under the burden was almost nil.  Factories were closing in the 'Rust' belt.  City payrolls were not being met and taxes that used to be a solid source of local municipalities income were now drying up.  They were cashing in their savings/retirement accounts to try and maintain some degree of normalcy.   

It's business as usual for big businesses to use bankruptcy as part of their business plan.  The government was bailing them out through TARP funds, banks were no longer amassing record income so they turned on the customers at alarming rates.  At first they offered plans to restructure your loans or mortgages then reneged on the promises.  The government bailed out them out and the consumer didn't reap any relief.  Homes that were once a slush fund were lost after years of paying the high interest, refinancing and taking out 125% mortgages.  Madison Avenue was telling the average wage earner they could live large chasing the American dream.  It was a trap and few were prepared for the disaster when it happened especially the government or the bankers.  

*I'm not condoning what the consumer did with their debt*, we had become complacent and unrealistic that something that happened, did.  Brokerage firms were closing as fast as the news could report them.  People who should have gone to jail are now in positions of power and once again are telling/asking us to spend, spend, spend.  Countries are not paying their bills, Greece, Germany, Russia, China and many more have massive debt that they can't pay so the answer seems to be print more it will all even out in the end.  When it again fails and it will, the ones who will suffer the most are us. 

More and more consumers have learned the lessons and are paying off their credit cards monthly (53%) but there is still a large portion who are not (47%).  The recent figures show the average balance owed by card holders has gone up.  The jobs market has shown improvement but those are questionable numbers they are using.  The jobs that are being created are the lower income service jobs for every manufacturing job created there are 23 waitresses' or waiter's jobs created.  Manufacturing jobs are scarce and more and more eligible workers are giving up the quest, the numbers are skewed and misleading.  

Credit reports are riddled with errors and anything that can be done to create a more meaningful and accurate report should be implemented.  The information is incomplete but a bad debt can stay on your report for 7 1/2 years while you can get a mortgage if you have been diligent to pay your bills for 2 years after a bankruptcy.  If you've taken the steps to change your financial habits then there should be an attitude of forgiveness for your past problems.  You as an individual are at the mercy of big business, your health, national disasters and the government and if you have an unavoidable and/or temporary setback is it fair to punish you for 7 1/2 years after you throw in the towel?


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## WhatInThe (May 9, 2015)

I agree with some of the crap the credit agencies and banks pull. And debt collectors-pffft.  I know people on both sides of the bankruptcy coin-the catastrophic event vs irresponsible spending and financial behavior. Nor do I have any problem with second chances which bankruptcy should be but not a get out of jail free card.

But, BUT unfortunately one of the bankrupt/ irresponsible spenders I know fits the profile many employers or even insurance companies might use/derive from one's credit  report, their credit score and behavior do match up. Example-many car insurance companies say customers/drivers with better credit scores make better drivers. If you count ticketed offenses alone his score matches his driving let alone the stuff he got out of or habits I've seen. The same person not only has lost management jobs but lost his own business. If a potential employer were to use his credit score as 'a' factor to determine if he could manage money again his credit score would line up with a profile of a low credit score job applicant. Not saying it's necessarily right to profile but there is some validity to the way business want to use a credit score as a tool to profile or determine someone's qualifications for managing money or a job.

Then I've seen people swamped by medical expenses, irresponsible spouses, id theft etc. But if one choses to participate in the game of life they need to accept and abide by the rules along with suffering any penalties. But the same rules need to apply to the banks as well and as we saw 08 they wanted bailouts and refused the suffer the consequences of the penalties/rules and consequences of the game they chose to play.


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## Cole Slaw (May 10, 2015)

When you loan money to someone, you assume risk. That's why you charge vig. I have no sympathy for the banks, as they have operated, and are still operating, in a predatory fashion. I don't necessarily want them to be screwed, but i'm not going to shed tears if they don't get to gouge every last penny out of someone they suckered into a loan.


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## Robusta (May 12, 2015)

Some on here are defending banks for contempt of court?????? When a debt is discharged under bankruptcy,the debt is erased,plain and freaking simple. When a bank refuses to erase said debt the officer that makes that decision is in contempt of court! Why are people acting like these banks are making a charitable gesture when all they are doing is forced to obey the law.


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## WhatInThe (May 12, 2015)

Robusta said:


> Some on here are defending banks for contempt of court?????? When a debt is discharged under bankruptcy,the debt is erased,plain and freaking simple. When a bank refuses to erase said debt the officer that makes that decision is in contempt of court! Why are people acting like these banks are making a charitable gesture when all they are doing is forced to obey the law.



If the banks own the debt/bill absolutely they should report a debt erased through bankruptcy.  Most banks write off the bill in 180 days and/or either sell the entire bill/debt or hire a debt collector to collect for them. Where it gets fuzzy is when the entire bill/debt is flat out sold to collectors. Some refer to it a dead or zombie debt. Most people don't even realize their debt has been written off and sold. Then these collection agencies probably don't have procedures in place to regularly check the customers credit report for things like bankruptcy although if the bankruptcy lawyer sends letters to all people trying to collect that should put an immediate halt to collections and an open debts on the persons credit history. 

As the person says in the article even credit card bankruptcy can be grueling. I've seen it. I know people who were told/coached don't pay the bills for three months. Then they were told after about three months of collection calls finally ask or tell the collectors they want to settle which can be for as low as 25-30 cents on the dollar. Big problem is the credit is dinged and many never wind up settling. So until the collectors get notice from the bankruptcy lawyer they will continue. Also people are told if they decide to settle pay the original holder or bank the debt, the problem is many banks already closed & sold the account so in sense they are right, after a certain their obligations or abilities are limited. T

The big issue lies with who actually owns the debt/bill at the time of bankruptcy.


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