Credit Reporting and Bankruptcy: Is Your Post-Discharge Credit Reporting Inviting Trouble?

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In difficult economic times, debtors’ attorneys closely review credit reports looking for potential legal claims against creditors. Long after a debtor has been discharged from bankruptcy, creditors can find themselves defending claims of improper credit reporting. A recent case from the Eastern District of North Carolina illustrates the trouble facing creditors who furnish incorrect reports of discharged debt. See In re Adams (Bankr. E.D.N.C. 2010).

The Adams debtors filed a chapter 13 petition in 2008 and received a discharge after completion of plan payments. A few days after the discharge, the debtors filed a motion seeking a declaration from the bankruptcy court that all payments due on their residential mortgage were current. The mortgage lender was served with this motion but filed no response. The bankruptcy court entered an order declaring the mortgage debt current. Thereafter, the debtors applied to refinance their mortgage. They were turned down when their existing lender provided the prospective lender with a payoff statement and loan history containing serious errors. The report stated that the debtors’ residence was in foreclosure, which was not true. Despite repeated demands, the lender failed to correct the errors. The debtors then re-opened their bankruptcy case and filed a motion asking the court to find lender in violation of the discharge injunction and in contempt of court.

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