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Major lenders address zombie debts

We frequently write about how filing for bankruptcy can allow Americans to regain their financial footings. Unfortunately, some bankruptcy filers remain burdened by something commonly referred to as zombie debt. If you were to file for bankruptcy, the debts that you have either paid off or had discharged are supposed to be removed from your current credit record. Because these debts have been taken care of, in one form or another, there is no reason for the debts to be listed as outstanding on your credit report.

However, zombie debts reflect that a borrower still owes money on these debts, even though they have been taken care of by the bankruptcy process. These outstanding debts then drag a consumer’s credit score down. Thankfully, some major lenders are taking steps to ensure that bankruptcy filers in America are free of zombie debts associated with these lenders.

According to The New York Times, both JPMorgan Chase and Bank of America have agreed to free consumers from zombie debts tied to accounts with these lenders. It is estimated that more than one million Americans will be affected by this agreement. Hopefully, this high-profile development will inspire even more lenders to ensure that zombie debts are no longer tied to bankruptcy filers.

If you have filed for bankruptcy in the past, please check your credit score regularly in order to ensure that you have no zombie debts tied to your credit report. If you do have zombie debts outstanding on your report, please do not hesitate to speak with an experienced bankruptcy attorney about your legal options.

Source: New York Times, “Bank of America and JPMorgan Chase Agree to Erase Debts From Credit Reports After Bankruptcies,” Jessica Silver-Greenberg, May 7, 2015

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