According to the federal government, bankruptcy is a process by which people’s debts are forgiven and they are given a new start. However, according to a recent article, some federal judges are concerned that the practice used by some banks to keep their discharged debt alive threatens the idea of bankruptcy and should be halted.
After a person files for bankruptcy and gets his or her debts discharged, the bank that held that debt is supposed to discharge it. However, what some banks are doing is keeping that debt unofficially on the books and holding the filer’s credit score hostage. In other words, the bank refuses to remove the debt from a former client’s credit report unless and until that person pays back the discharged debt.
This has the effect of keeping the debt alive and well, despite the fact that a federal judge has ordered the debt discharged. Technically speaking, the banks are supposed to remove the debt from the credit report and also remove any notation that the debt was ever “past due” or “charged off.” However, reports are surfacing that banks are refusing to do that. Some are claiming it is due to clerical mistakes, but the frequency with which it is occurring suggests otherwise.
One federal judge has even threatened to refer one offending bank to the U.S. Department of Justice for criminal prosecution due to the bank’s conduct. However, the judge decided to continue the case and let the evidence speak for itself before doing so.
Filing for Bankruptcy in Kentucky
Kentucky bankruptcies, like those elsewhere across the country, are a proven method to help good people get out from underneath crippling financial debt. While it is true that in some cases banks are refusing to follow their end of the bargain, this is somewhat of an anomaly and should not be taken as a sign that the bankruptcy process is in jeopardy. Indeed, the federal government can and will step in to preserve the function of bankruptcy if need be.
If you are considering filing for bankruptcy in Kentucky or Indiana, make sure to speak with a dedicated bankruptcy attorney before proceeding. Bankruptcies can be complex both legally and financially, so it is best to have an experienced adviser along the way.
Are You Overburdened by Serious Financial Debt?
If you are currently overburdened by debt and are considering filing for bankruptcy, give the Schwartz Bankruptcy Law Center a call to set up a time to go over your case. The initial consultation is free, so there is nothing to lose by calling. We have helped countless people obtain the financial freedom they were looking for by assisting with their bankruptcies. If you would like to join their numbers and see what you can do to get a fresh financial start, give us a call today at 866-366-3328.
More Blog Posts:
Bankruptcy Judge Allows Debtor To Recover Attorney’s Fees After Creditor Violated Automatic Stay, Kentucky Bankruptcy Lawyers Blog, published October 6, 2014.
Bankruptcy Court Allows Malpractice Plaintiff to Sue Surgeon in Bankruptcy, Kentucky Bankruptcy Lawyers Blog, published November 2, 2014.