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Banks Agree to Eliminate Debts From Credit Reports After Bankruptcy Discharges

bankruptcy relief lawyerJP Morgan Chase and Bank of America, two of the largest banks in the country have agreed to update credit reports of individuals who had owed them money to show the debts were discharged pursuant to bankruptcy proceedings.

Federal Law requires once an individual files a Chapter 7 bankruptcy and is discharged from said bankruptcy that the bank who the money was owed to is required to update the debtor’s credit report to show the debt is no longer due and owing to the bank. Previous notations such as “past due” or “charged off” should also be removed.

Bank of America and Chase Manhattan Bank are taking this action because of Federal litigation which was brought against them which claimed the banks were holding borrowers’ credit reports hostage until these individuals agreed to pay money for debts that were discharged and they no longer owed.

Mortgages Discharged in Chapter 7 Bankruptcies

If an individual or husband and wife file a Chapter 7 bankruptcy and they list their mortgage in that bankruptcy, the mortgage debt is discharged. They therefore no longer owe the money. The bank still has the recourse of proceeding with a foreclosure action and causing the home to be sold and using the proceeds from the sale of the home to pay off the debt that was owed. If the sale of the home does not cover all of the debt, the homeowners are not subject to a deficiency judgment for the balance due and owing. If the bank refuses to remove the negative inference of the unpaid mortgage debt from the former homeowner’s credit reports it will have a negative impact on their obtaining credit in the future. It will also prevent them from rehabilitating their credit and obtaining a new mortgage in the future.New York family law attorney

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