Consumer Law

Why Discharged Accounts Still Show Up With Balances On Credit Reports

By M. Stan Herring

We have been seeing lots of problems with Alabama consumers who have discharged debts but the debts are still on their credit reports showing up with a balance owed. No balance is owed. There was a major article in Business Week that came out that helps explain why this happens. Please read this article in its entirety by Robert Berner and Brian Grow. But here are some excerpts that will give you a good sense of the problem and why it exists.

Here is another excerpt:

This kind of failure by creditors to update credit reports happens with some frequency, consumer lawyers and court-employed bankruptcy trustees say. And it can have consequences: In September, 2003, when Rathavongsa tried to close on a $274,650 mortgage for a new house, his would-be lender, Wachovia (WB ), said he would either have to pay Capital One or show proof from the credit-card company that the debt had been discharged. Despite several calls and a letter from his attorney, he says, Capital One never revised the credit report. To obtain the home loan, Rathavongsa eventually did what many consumers in this situation do. He gave in and paid Capital One $9,523 he no longer legally owed.

Full post as published by Alabama Consumer Blog on February 02, 2008 (boomark / email).