Debt Cancelled by Bankruptcy Still Haunting Borrowers, Says Strategic Consulting Services

New York – December 9, 2014 – Strategic Consulting Services (www.strategiccs.org), a New York firm providing financial advisory services for consumers warns of a trend in which a borrower's debt discharged in bankruptcy is not being fully discharged by lenders. A growing trend is showing that lenders are taking slow action in updating credit reports, sometimes as much as years or decades. In some cases the lenders say they refuse to update the records until the debt is repaid. This coercive action is being investigated as illegal profiteering which can potentially harm the credit reports of millions of Americans.

Personal bankruptcy in the United States involves a court order where the credit owed is relinquished from the debtor's responsibility. While the bankruptcy gives relief to the debtor, it causes a complicating loss for the lender. At the same time, the business plan of every lender includes a calculation for the percentage of debt that the lender expects will never be repaid. To complicate matters, often the debt is sold by the lender to other companies that service the loan and collect payments. In other cases the loan is sold by the lender to debt buyers or collections agencies.

Recent investigations by the office of the United States Trustee and court cases are highlighting a growing trend where lenders are ignoring the bankruptcy discharge, which cancels the debt. Their lack of action keeps the debt alive on credit reports. The disregard by the bank damages the consumer's credit score, keeping the consumer's credit report hostage until the debt is repaid. If the consumer in question takes no action, the impact to their credit score is similar to blackmail or extortion for non-payment.

Investigations by the Trustee office include JPMorgan Chase, Bank of America, Citigroup and Synchrony Financial (formerly GE Capital Retail Finance) for violating the law and ignoring discharges. The banks say they comply with all federal laws in the collection process and debt sales. In some cases, the banks can argue that the accounts were charged-off and sold to debt buyers before consumers filed for bankruptcy protection. In the case of Rusty Haynes v Chase Bank, Judge Robert D. Drain denied a motion to dismiss a class action lawsuit against Chase. In a statement he wrote, "I believe the complaint sets forth a cause of action that Chase is using the inaccuracy of its credit reporting on a systematic basis to further its business of selling debt and its buyer's collection of such debt."

At question is how the banks report debts to credit reporting agencies. As the bankruptcy voids a borrower's debt, creditors are required to update reports to show the debt is no longer owed. The U.S. Trustee investigation aims to show if the trend represents an intentional business tactic ignoring the law in order to maximize profit at the consumer's expense. If the Trustee's office does determine such activity violates bankruptcy law, they could audit the lenders to extract large penalties.

"Billions of dollars are at stake, impacting millions of individuals who may not even realize their bankruptcy has been compromised by unfair lenders. Going through bankruptcy has a big impact for individuals, leaving a mark that will complicate every loan they need for a decade. Lenders who don't acknowledge the loan was discharged add insult to injury for the borrower, who now may not qualify for a home loan or look bad when prospective employers run a credit report," says Ben Kittle, Senior Financial Consultant at Strategic Consulting Services. "These potential violations of U.S. bankruptcy law are a prime example of how financial companies are commonly skirting the law and financial system safeguards to increase profit from consumers."

About Strategic Consulting Services
Strategic Consulting Services is a financial services firm with teams specialized in Debt Management, Mortgages and Business Services. With a comprehensive client-focused approach, the Company provides assessments looking beyond immediate financial issues to help clients build greater financial strength with smart habits and choices. Since 2007, Strategic Consulting Services has helped individuals and small businesses create savings plans, reduce debt, and make wiser spending choices. For more information visit www.strategiccs.org.